Final answer:
The incorrectly capitalized word in the sentence is 'Toronto'. Proper nouns like city names should always be capitalized, making the correct form 'Toronto'.
Step-by-step explanation:
Capitalization (American English) or capitalisation (British English) is writing a word with its first letter as a capital letter (uppercase letter) and the remaining letters in lower case, in writing systems with a case distinction. The term also may refer to the choice of the casing applied to text.
Conventional writing systems (orthographies) for different languages have different conventions for capitalization, for example, the capitalization of titles. Conventions also vary, to a lesser extent, between different style guides. In addition to the Latin script, capitalization also affects the Armenian, Cyrillic, Georgian and Greek alphabets.
The word in this sentence that is incorrectly capitalized is 'toronto'. When referring to cities, the proper noun should be capitalized. Therefore, the correct capitalization should be 'Toronto'. The sentence should read: She used to live in Toronto, but now she lives in Vancouver.