She has traded down by well over $250,000, which is more than her taxable gain, so she will recognize all of her taxable gain and pay all of her taxes. 

For example; if the gain is equal to 25% of the sale price, with each dollar of principal is received, 25% will be recognized as the gain and taxable.

Then can she sell it: yes, but unless it is exchanged again, the accumulated capital gains would be taxable upon sale.

Files with IRS to be taxable as a C-Corp.

However, if you don’t follow the rules, you could purchase a property the wrong way, disqualify the IRA, and create a taxable event.

I like the thought but first is that any money placed into escrow to be paid later is constructive if not actual receipt and would be taxable in that situation. 

However it seems reasonable, since jurisdiction physically rests in that state, and provided rental income is taxable there,that the state would require the owner "out of state" recipient be taxed accordingly.Hope this is helpful.

@Andrew Thomas Vedder Not a REA, but an REP :)  See https://www.biggerpockets.com/...Assuming you're not an REP (you would know if you are ;) all your passive rental income would go on your Schedule E on your 1040, and you would not be able to deduct losses beyond your rental income on your W2 or 1099 (schedule C, if self employeed) income.Hopefully the BP article makes sense and is a good place to start.Our goal is to reduce our net passive income to $0 and pay no taxes on it, and keep any non-depreciation expenses (that is, out-of-pocket expenses) to a minimum so that we're cashflowing.Here's a contrived example:- Taxable W2 (job) income = $200k- Passive rental income = $20k- Rental property expenses = $5k (mortgage interest, insurance, p-tax, etc. not including depreciation)- Depreciation = $10k- Your net rental income is $5k which would be taxable and added to your 1040 on Schedule E- total taxable income = $205kSecond contrived example:- Taxable W2 (job) income = $200k- Passive rental income = $20k- Rental property expenses = $15k (mortgage interest, insurance, p-tax, etc. not including depreciation)- Depreciation = $10k- Your net rental income is $0k and is reported on your 1040 on Schedule E- The -$5k passive loss is carried over to the next year's taxes- total taxable income = $200k (the passive loss will not affect your 1040 W2 income)I hope that made sense :)The holy grail is to become an REP and write-off those passive losses on your 1040.

Many of these issues can be avoided using a Land Trust for the transfer, as a transfer to a revocable Trust is not normally treated as taxable.

A refinance does not trigger a taxable event.