This is a jointly owned property and upon the death of a joint owner, the share in respect of the joint owner shall devolve equally on all the class Legal heirs of the deceased joint owner.
Thus the share of property of your deceased father in law shall devolve equally on all his legal heirs consisting of his wife and children.
There is no question of LTCG for the inherited properties, since the property has not been sold for any consideration.
Now coming to your mother in law's own share in the property.
If she wishes to give away 25% share of her property to her four sons alone, she can execute a registered gift deed in favor of all her four sons jointly.
This also will not attract LTCG in your mother in law's hands at this stage.
Hence there is no need to purchase a house out of this income or buy any bonds because this property received as gift from your mother in law by her sons is not after paying any consideration to her.
Dont get confused by misreading the different provisions of law together.