Generally, a widower is not entitled to a $500,000 exclusion. You are allowed only the $250,000 exclusion. See TomD8's reply for the exception rules.
But, you are allowed a "stepped up" basis on your wife's half of the property. Using an example:
You bough the house for $100,000 many years ago. It was worth $400,000 when your wife died and worth $450,000 when you sold it. Your cost basis is now $50,000 (your half of the original cost) + $200,000 (the fair market value [FMV] of your wife's half, on the date of death) = $250,000**. Your capital gain, on the sale, is $450,000 minus $250,000 = $200,000.
**If you live in a community property state, the entire cost basis steps up, not just half. So, if your lived in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, your cost basis (in the example) is $400,000 and your capital gain only $50,000.
