Here are specific answers to your specific questions, without going around your elbow to get to your thumb. 🙂
I understand that as donor my mother needs to file form 709 and pays zero tax because of the $5.45M gift limit. That 709 form is not too hard to do by hand in this case.
That is correct. The value of the gift she is giving you will be subtracted from her lifetime allowance of $5.45M that can be transferred to you with no tax consequences on her.
My mother also claimed depreciation on the rental property during the years under her ownership. My questions are:
Does my mother have to pay tax on the $80K profit/capital gain ($180-$100K)?
What capital gain? I think you are referring to the depreciation your mother has already taken on the property. The answer to your question is no, she does not recapture that depreciation or pay taxes on. You are the one as the recipient of the gift, that will pay taxes on it in the year you sell the property. When your mom gifted to the property, she gifted you everything associated with that property, to include all prior year's depreciation she has already taken.
Does all the depreciation now work back in her 2016 tax return to pay more tax?
Bottom line is, you are the one who will pay tax on that depreciation arleady taken. But you will not pay it until the tax year you sell the property. There are two ways to handle this is "your" tax return.
1) your mother gifts you her original cost basis in the property along with all the prior depreciation. Your cost basis on the property will be her cost basis *MINUS* all the depreication your mom took on the property while she owned it. This means your "in service" date will be one day after your mom reported it as given to you, and for "YOU" depreication starts all over for the next 27.5 years depreciation the new lower cost basis for you over the next 27.5 years.
2) Your mother gifts you her original cost basis int he property along with all prior depreciation. Your cost basis is "EXACTLY" the same has hers, your in-service date is EXACTLY the same as hers, and your prior depreciation already taken is EXACTLY the same as hers.
Overall, I highly recommend you select option 1) above.
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For your mom on her tax return, she needs to work through each individual asset one at a time and select the option for "I stopped using this asset in 2019". Then on the "Special Handling Required?" Screen she *must* select YES. If she selects NO then she will be asked for sales information, and the fact is she didn't sell anything.
Your mother will be entering a specific "date of disposition" for each asset, and that date should be the same for all assets.
If you elect option 1) above, then your date of acquisition/in-service must be one day "AFTER" your mom's date of disposition.
