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I have heard (and know little ) about a situation where you can swap "like" real estate holdings. Is this something they can pursue or does anyone have any suggestions to avoid a large tax windfall.

I'm in the midst of doing the same - moved out of state and am selling the rental house. I've looked into how to reduce taxes since this is a big tax year for us but two years from now we will be making very little (at least that's the plan).
I looked at the 1031 exchange - you can exchange for any other real estate, as long as it's not for personal use. That could be vacant land, office buildings, a golf course. The time frames are absolutely set, however, and there's very little tax benefit unless you roll over the whole amount or nearly. Also, you must roll over into a depreciable property or else you must show the depreciation taken over the years as a gain (25% tax rate).
What we plan to do is sell and take a partial payment this year with the balance in January 2002. That is an installment sale and you spread your gains over two years to avoid tax bracket creep. Or you could take an installment sale over 10 years or more. Each year that you receive payment you recognize a portion of the capital gain. Schedule D and the instructions (and another form, 8xxx something) show how to do this.
One final option is to take any investment losses against the capital gains.
Keep in mind that capital gains are taxed at 20% if you're in the 28% bracket and 8% (starting in 2002) for the 15% (or is it 10% now?) bracket for property held 5 years. So if they can get down to the 15% tax bracket ($43,850 in taxable income) they will save a bundle.

BTW - I am trying the italics thing for the first time - I have my fingers crossed.
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