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They take a chunk of whatever you get for the property, less what you have in it.
For example, you pay $200,000 for property, spend $100,000 improving it and sell it for $900,000. You get $500,000 exempted from tax, pay capital gains on $100,000. Cali is going to tax the heck out of that $100,000. I think this is a one time exemption, so you can't do it again if you move into another house for a few years and sell it at a profit.
You are going to want to speak to your tax guy before you do anything. May want to set Mom's property up in a trust.
Maybe ask Hugh to talk to his wife. She is smarter than any accountant you find is likely to be.
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She was the kindest person I ever met
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