@Mike9241
I thought about your complication, but I think it will not be an issue. If the home was owned solely by spouse #1 before the marriage, then spouse #2 would not have even qualified to use their exclusion unless they had resided in the home at least two years. If the gain on the home was less than $250,000, then it could also have been excluded by spouse #1 alone. This gives two arguments that the taxpayers could use if the IRS were to contact them regarding the exclusion on house number two. The IRS won’t even know about the gain on house number one or house number two unless a 1099-S was issued at the closing.
