do both couples get that $500,000 exclusion?
Only if both couples lived in the house as the primary residence, for at least two of the last 5 years they owned it. If any one individual does not meet that requirement, then that individual does not qualify for the exclusion.
If the house was your primary residence for any two years (730 days) of the last 5 years (1826 days) it was owned, counting back from the closing date of the sale, they qualify for the exclusion. (There are other requirements that must be met. I'm just not mentioning them here.)
If the last occupant to vacate the house was a paying tenant, then one could qualify for the entire exclusion.
If the last occupant to vacate the house was an owner, then the amount of the exclusion will be pro-rated.
