Clients lived in residence for 20 years.  MFJ.  Sold residence in 2021. Had 170,000 gain excluded.

Client bought new home in 2021. Sold in 2022 due to unforseen circumstances.  Lived in 2nd home

16 months.  According to the calculations all the gain on new home is excluded.  168,000 gain. Is this

correct?  Working through the calculations, it appears that the original $500,000 exclusion was reduced

by gain on 1st home, and then 2nd home gain was not enough to use up all the exclusion and it was

all excluded.  Assuming this is correct, is the basis on the new house (3rd one) reduced by both the gain on 1st house and second house?  Does the $500,000 exclusion start over again after 2 years residency 

in new house?