Are there tax implications for owning overseas property?

My mother-in-law lives in California (as do my wife and I), and she owns a property in Shanghai, China. According to Shanghai law, non-residents are only allowed to own a single property. She would like to circumvent this by having my wife and I sign for a second house, a million dollar property, that she would be paying for in cash.

She intends for us to inherit the house after her death, but in the meantime she would be renting and managing the property and collecting passive income.

We would not be receiving any income, so my question is: would this arrangement have any tax implications for us in the States?
Asked Feb 22, 2015

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