He most certainly can gift the properties to you and avoid capital gains. There is not income tax on gifts, either to the donor or the donee.
However, there is a gift tax. There is an annual exemption of $10,000 ($20,000 if married and spouse joins in the gift) per gift to each donee. There is also a lifetime exclusion of $675,000 for gifts made in 2001. The lifetime exclusion is scheduled to increase each year. Therefore, if the total property is worth under $715,000 ($755,000 if he is married and his spouse joins in the gift), there would be no gift tax to pay.