IS this her primary residence? Did she use this house as her primary residence for atleast 2 years? What State is she a resident of?
this has been her primary residence for the past 30 years, until July 1, 2010 when she moved to assisited living. She is in California.
Is she sells the house now than she will owe tax on the net capital gain. She will be able to exclude $250K($500K if she is married filing joint and spouse meets the use test) of the gain.
Hence she will owe tax on gain in excess of $250K.
The gain will be long term and taxed upto a maximum of 15%.
For 2011, the estate tax applies on estate over $5 mn.
You can exclude $5mn worth of estate from taxation
So, it may be a good idea to sell the house now and use the exclusion.