“If your parents gift the house to you now, your tax basis would be its present value. Let's say that's $100k. If you sold it say 10 years from now and its value was $500k, you'd owe $60k in capital gains tax on the $400k profit (assuming 15% capital gains tax applies and stays the same in 10 years). ”
No, that’s not correct. If they give him the house today, his basis for federal income tax will not be the present value of the home. It will be his parents’ basis in the home. Thus, as tax lawyers describe it, their basis “carries over” to him. His parents’ basis in the home, assuming they purchased it rather than inheriting it or receiving it by gift, is the price they paid for it adjusted by any improvements they made to it and any depreciation they took (or could have taken) on the property. For example, suppose 20 years ago they bought it for $25,000 and put another $10,000 in improvements in it over the years. Their basis in the house would now be $35,000. That is the basis that he would get if they gave him a gift of the house today, in this example. Thus, if he immediately sold the house for $100,000, he’d have a capital gain of $65,000 on which he would pay tax at a maximum rate of 15%.
However, if they gave the house to him in their will, and they died today, his basis in the house would become the fair market value of the house on the date of death. That's known as the "step-up" in basis to fair market value. In the example above, that would mean his basis would be $100,000 instead of $35,000. So, if he then immediately sold it for $100,000, he would have zero gain and pay no income tax on the sale of the house.