She will likely be exempt from capital gains tax since she lived in the house for 2 of the last 5.I think she may need to be paid in full before that 5 years runs out to get the full exclusion.I'd consult a CPA to know for sure the tax implications. 

Annual adjustments: These income thresholds and premium amounts are adjusted annually.It's important to note that various types of income can affect your MAGI, including wages, Social Security benefits, pension payments, and even tax-exempt interest from municipal bonds.

If the property owner claimed a homestead exemption for their real estate taxes for the year of the foreclosure, then there is only a six month right of redemption, rather than the regular one year right of redemption.

The Homestead of Exemption is $50,000 off your Property Taxes.

I wonder if the tax forms would be mailed there, and then that trust company will file to IRS to explain it is tax exempt? 

There is often a time limit on how long you are exempt from paying local taxes on foreign income, and of course you will owe the US for life. 

Just because it's a primary residence for him doesn't automatically exempt your portion from capital gains—you're still considered an investor.You also need to think about what happens if your friend can’t buy you out or if your relationship changes.

Fair Housing may not apply to this landlord: https://www.equalhousing.org/fair-housing-topics/exemptions-...2.

Holding Costs, what are taxes, are there agriculture exemptions.5.

Since this was your primary residence 2 of the last 5 years you would be exempt from taxes on a sale up to $250k in profit ($500k if married filing jointly).