would this cause an issue with the IRS?

The IRS is willing to leave their tax in the deal as long as you leave your basis and gain in the deal. 

Tzvi the point he was alluding to, was that according to the IRS, if you are filing jointly, then only you OR your spouse needs to reach the real estate professional status, which allows you to use the passive deductions to offset your JOINT income.

If it's Christmas eve at 2 AM and your cat swallowed poison and you google search to find the house-call vet that'll come see your cat right now in the Bay Area on Christmas eve, I did the mortgage of the guy you will find.What he says he makes if you ask him: $300k/yr.His taxable income, what the IRS thinks he makes: $75k/yr.What the mortgage industry thinks he makes $175k/yr.What he really makes: who knows, it's an irrelevant question anyways. 

Try IRS Publication 527 for your primary question.

I am in no way a licensed professional but I’m happy to hop on a call and teach you what I’ve learned from mistakes.

Your answer will determine how he reports it to the IRS.

Any good real estate investor title companies in the Miami Dade ir Broward County area? 

But if you simply took title and your parents just kept living there then the IRS would classify that as property for personal use not investment and the 1031 wouldn't apply.

The IRS doesn't care what your financial situation is.