Taxpayer divorced in 1991.  Decree allowed former spouse to live in home for as long as she wanted.  Title was kept in both names.  Now, former spouse has moved into nursing home and the house is being sold.  This jogged my memory enough that I looked up Section 121(d)(3)(B), and the nonresident spouse qualifies for $250,000 exclusion because the ex qualifies.  (Or would it be only $125k?  In this case, it doesn't matter.) Even when the law wasn't changed until 1997.  

This reminds me of a unicorn I saw back in 1994, when the old rules applied.  Taxpayer sold two primary residences in same year (or maybe it was a two-year period).  Gain was rolled over from first to third house.  Gain on second house was taxable.