According to the figures given, the total gain on the sale of the house will be around $60,000. It appears that Mary (who is actually the OP, MeeshkaDiane) will qualify for the Section 121 exclusion of up to $250,000. She has lived in the house and been a part owner for more than 2 years out of the last 5 years.
If Joe still owns a 1/3 share of the house when it's sold, he will have a long-term gain that he will probably have to pay some tax on, unless his income is low enough to put all of the gain in the 0% bracket. He should definitely transfer his 1/3 share of the house to Mary before she sells the house. That way neither Joe nor Mary will have to pay any tax on the gain. Joe will have to file a gift tax return in any case.
I'm not sure how this works with Peter, since he is selling most of his share to Mary. I don't think there's any legal way that he could avoid having a taxable gain from that sale, unless he sells it at a loss, but that doesn't seem to be the plan. But he should at least give Mary the portion that he intends as a gift before she sells the house.
I'm not going to get involved in calculating anyone's taxable gain, or the overall net benefit of the various options. As I said in the other thread, the three siblings should each consult a local tax professional.
@Anonymous_, @Bsch4477, or @Mike9241 may have some additional comments.
