There may be some potential reductions in the taxable gain. First, you mention she is in assisted living at this time. Therefore it appears she had at least 12 months in the home prior to the sale in 2022 and any time in a licensed assisted living facility in the five years prior to sale counts toward the 24 months of residency rule. So she may meet the full exclusion using those months.
If not, she could qualify for a partial exclusion based on the health or unforeseeable events exception.
Here is Publication 523 for reference. Check the eligibility step 3 -Residence paragraph "If you become physically... unable to care for yourself." Also see the "Partial Exclusion" section.
On another aspect you may need clarification on how the sale/proceeds are being reported. It's strange that there was a 1099A for debt cancellation and then proceeds sent for something related to the home/sale on a form 1099Misc.
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