You're going to have to reply to the notice with a 1040X and explanation...

What was the situation?  Was this primary home for one? both?  rental property?  equal ownership? You really need more detail to ascertain how the transaction should be correctly reported; and the daughters return may have to be amended as well.

Also, a good idea to get a copy of the 1099S issued for any sale... relying on 'your clients' explanation of how they're handling something isn't always a good idea.