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They now have lived in two homes over 4 years, 2 months where they lived in each home for 2 years, 1 month. If they sell both homes in the same year, could they exclude the gains from both homes?

No, generally you can only claim one exemption every 2 years, so the sales would have to be 2 years apart from each other. Of course, as with many tax rules, there are some exceptions, like the death of a spouse, or a divorce from a spouse within the 2 year timeframe, if you're in the military, etc. IRS Pub 523 has the details https://www.irs.gov/pub/irs-pdf/p523.pdf (I know - that would require looking it up.)

AJ
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