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What Cyn is referring to is called a "like-kind exchange" and my attorney advised us that it was really a freaking hassle to complete. Your new 'like-kind' property possibilities must be identified before the sale of the existing rental, and only one of these previously identified properties actually being purchased would qualify. Regardless, once a property becomes a money maker (i.e. rental) it is subject to capital gains. Like-kind exchanges only delay the paying of these taxes. (in the hopes that future taxes will go down.)
I wonder if being disabled is an option to explore? Seems like a visit to a tax attorney should be in her very near future.
Either way inhereting a rental property without liability except for taxes is still essentially free money. (always look on the bright side of life ;-) ).
-bear
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It's alot easier to ask for forgiveness then it is to ask for permission.
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