It's a gift not a sale. Nothing to report on her 1040. There is no recapture of depreciation on a gift.

Depending on FMV she might have to file a gift tax return.

the Kid's get her basis, which is net of the accumulated depreciation.

I'd have to look it up to know whether  you carry the actual basis and continue the depreciation if they continue to rent out the rental portion, or whether you take the net basis and start over - but someone will chime in on that pretty quickly.