Both conditions must apply. If you did not dispose of the house then you would not be exempt and you would not fill out the form.
Also, since you divorced and she transferred the house to you, you do not qualify for the military exemption. The exemption would be for her if she kept the house but not you.
Line 2. Check the box if you (or your spouse, if married):
Are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community (defined below); and
Sold the home or the home ceased to be your main home after 2008 because you (or your spouse, if married) received U.S. Government orders to serve on qualified official extended duty (defined next).
If you (or your spouse, if married) meet both of these conditions, you (and your spouse, if married) don't have to repay the credit. Instructions form 5405
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