From a tax standpoint I would never even suggest the gifting of real estate of any type (commercial, investment, rental, personal use, etc.) to a heir. My main reason for that is because when you gift the property, you also gift the "original" cost basis of the property from the giver. So what the property may be worth now doesn't mean squat for the recipient really. It can actually hurt the recipient tax-wise years down the road when they sell or otherwise dispose of the property.
So if your grandmother's cost basis is $3000 from 30 or more years ago and she gifts it to someone before she passes, the fact the property may be worth $300,000 now doesn't matter. The gift recipient also receives the original cost basis of $3000. So if later down the road the gift recipient sells the property for say, $250,000, that means they will be paying taxes on a $242,000 gain which will put them in a significantly higher tax bracket and automatically disqualify them for quite a number of possible tax deductions that year, because their income from all sources will just be to high.
I would suggest that your grandmother leave it to her daughter in her last will and testament.In the meantime, her daughter can just manage things on her behalf, as I would assume the rental income is enough to cover to mortgage payement and property taxes. If the gransmother "gifts" her daughter the rental income left over after paying the mortgage and property taxes, then so long as it's less than $15K per year, nothing concerning this cash gift needs to be reported to the IRS or anyone else for that matter.
So let the daugher manage it while Grandma still reports everything on her tax return. When the grandmother passes, her daughter will inherit the property and she will also "inherit" the fair market value of the property on the day the grandmother passed, as her cost basis - which will be a hell of a lot more than a "gifted" cost basis. Additionally, all prior depreciation already taken on the property by the grandmother is basically wiped clean and just "disappears" into la-la land so that no depreciation recapture is required.
So if the daughter "inhertits" it, and also gets the higher cost basis of say $300,000 for example, she can sell it for $300,000 or less and not pay one single penny of tax on that money.
