I saw it in a revocation of a PLR 200004022. The PLR said where there was no business activity carried on by spouses and no deductions taken, the sec 121 exclusion still applied. The revocation just said something like 'not in line with IRS' current thinking.' I couldn't find much/any follow-up IRS guidance on the point. 

Taking the property out of the LLC is tempting, but the ownership requirement wouldn't be satisfied for the required time period. I also thought about having one spouse surrender their membership interest, making it a disregarded entity under 26 CFR 1.121-1(C)(3)(ii), but I think it presents the same problem.