<< On the sale of the house there will tax issues involved. Her basis is probably quite small, meaning at least 20% of the gain will go to the tax man. >>

Just being a little picky here, but I got the idea from the post the sale of the house would gross about $120,000. If that's the case, because of the new rules on the sale of residences, even if her basis is $0, she will not pay any tax on the sale. Single individuals may now exclude up to $250,000 on the sale, provided they have owned and occupied the home at least 2 of the previous 5 years, among other requirements.

Hope this helps,

Cameron