"She had a lawsuit"

And this is the Settlement. It isn't the sale or the foreclosure debt forgiveness. 1099-Misc is for the lawsuit settlement. Not property damage or personal injury settlement, right? That's not part of the sale.

The IRS has guidance:

https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments

https://www.irs.gov/pub/irs-pdf/p4345.pdf