Can I claim my mother in law as a dependent?

She meets all the other requirements, but I am not sure if her income is considered Gross income to claim as a dependent. She gets her deceased husband's pension (he retired from that company in the mid to late 80's) $1200 a year total distribution and rolled his 401K into an IRA (in '95) with a yearly distribution of $3000.  Are these considered gross income or tax exempt income?