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@nolanm wrote:

Couple MFJ owns 2 homes and live in both at different times of the year. The rule of 2 out of last 5 years applies to both homes. 

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Are you saying it was something like they claimed that each year they alternate - 6 months of Principal Residence at one home, and 6 months or Principal Residence at the second home? 

If so, it seems like you have "Nonqualified Use", so neither home would qualify for the full exclusion (in which case the prior tax return is wrong because part of the sale is taxable).

In regards to the second home, why did they move?  There are some circumstances that would qualify to tax the exclusion again.  But like the first home, there would also be Nonqualified Use that will reduce the excludable amount.