"If an item they paid $80 for sold for $50 online and you say it should be valued at Goodwill rates of $5-10, then they should be paying tax on $40 for that item (less shipping/fees)??"

Yes. If you intend to report it as Sched C, which is what you put in the Title, then this is being in business. You would need to find a FMV (from a reliable source, such as It's Deductible or Goodwill) for the conversion value from personal to business.

Or, you simply want to explain the 1099-K by showing other income and other expense as equal to each other, for "yard sale" type activities, as Lisa and rbynaker described. But pushing that amount you list, every year, starts to be close to a business. Intent is part of this; is there the intent to profit? Is she making profit, when the numbers are corrected?