Can ownership interest be converted to mortgage to avoid taxes?

[Jeff Pollack]

Hi all, 

Here is my situation. Way back when my wife and I purchased our 1st house my in-laws helped with our down payment to reduce our mortgage. As such, my mother in law (father in law is deceased) now owns 17% if our property. We have now bought a new property and will move in after renovation. We will then sell our current property. My mother in law's 17% ownership has doubled in value from  $115k to $280k. Can the presumed capital gain of $165k be converted before sale next year into a mortgage secured by the property  to avoid taxes and have the secured property changed to our newly purchased property?