Since they have lived there for more than 2 yes, there won't be any capital gains tax, so she won't need to bother with a 1031 exchange (only necessary to defer capital gains tax into your next investment). An IRA can be used to buy future properties, and there are plenty of people on here who can help with that much better than I can. If she's interested in selling, I'd be interested in finding out more about the property. Send me a private message if jays of interest, otherwise she can go the traditional route of engaging a real estate broker and pay the associated commissions.
However, Unless they have lived in the whole thing what they really have is a split use property. They have lived in 1/4th so 25% of the sale would be their primary residence and tax free is the gain falls under the maximums. The other 3/4ths of the property is an investment property and I'll bet they've been declaring rent and depreciating and writing off expenses on it for their period of ownership. so 75% of the sale is an investment property and subject to capital gains tax and depreciation recapture unless they do a 1031 exchange and defer the tax on that portion.
The sale of a property like that is very easy for an experienced team. You'll market it just like you always would. In situations where we act as the QI we work with the clients accountant to get a determination of the %breakout of primary/investment. And then the closing docs reflect those percentages. the client gets the tax free portion immediately. And the remainder goes into the exchange account for them to buy their replacement property.
Split use properties are an incredible opportunity to get some tax free money and defer the tax on the rest so you can leverage your investment portfolio also. Well done.
Glad you clarified @Dave Foster ! I learned something here.