Stop making this more complicated then it needs to be.

It gets more complicated if you exceed the amount of your contributions and start dipping into your gains.

As long as the rental period is qualified, your deemed personal use days after the rental ends will be zero.See IRC Sec 280A(d)(4).If you have personal use days inside of the qualified rental period, or if the rental period is not qualified, things get complicated and it is advisable to consult your tax professional.

Here is one thread on it -- be sure to read the last post which is CA specifichttps://www.biggerpockets.com/forums/51/topics/850249-setting-up-legal-entitesThe 1031 obviously provides a complication...Sounds like with what you are trying to do, you need to talk to a professional and anything here probably won't be much, honestly. 

Creative deals are the most complicated in RE.  

I'm not sure how complicated the taxes would be in this case though...e.g. who gets the interest deductions, expense deductions, etc.2) Start an LLC to manage everything and give my parents some level of member ownership in the LLC. 

We spend a ton of time on the lease and amendments as it gets quite complicated in understanding responsibilities of "true NNN."

That's a pretty common technique in a down market.

Four years ago, my income had decreased significantly and I am in a long complicated situation today with my house.

@Todd Pultz this is starting to sound A lot more complicated then expected.