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As long as she has used the home as her main home for at least 2 years in the 5 years preceding the sale, then she can exclude from her income up to $250,000 (assuming her filing status is single) of the gain. If she then makes gifts to some of her children under the limit of $13,000 each, then she does not have to report the gifts to the IRS. The children will not have to report the gifts as income as gifts (regardless of the amount) are not considered taxable income to recipients.