Q. What if there was a period where the property was rented out, but the owner did indeed live in it for 2 of the 5 years prior to sale?
A. The owner qualifies for the home sale exclusion, but must recapture (pay tax on) the depreciation claimed (or should have been claimed) while it was rented.
If the period of rental occurred prior to the owmer occuping the home as their principal residence, a prorated portion of the capital gain is also taxable.
Q. What if there was a period where the property was rented for business use in a 1065? The owner did indeed live in it for 2 of the 5 previous years.
A. It depends on more info. "Business use"? 1065? "When were the "5 previous years"
