Just to provide more clarification here, and I'll start by stating:
You must have lived in the house for at least 730 days of the last 1826 days you owned it. The "lived in" period of time does not have to be consecutive either, so long as it is all within the last 1826 days you owned the property, counting backwards from the closing date of the sale.
if you lived in the property for less than 730 days "AND" your move was because of military PCS oriders (there are other reasons I'm not getting into here), then you can still qualify for a partial exclusion. Additionally, if it was a military directed PCS move, the day count for both "lived in" and "owned" is not extended. It is "SUSPENDED". In other words, you stop counting days. Example:
You purchase the home on Jan 1, 2010 (the closing date) and you move in that same day and actually sleep in the property that night, Jan 1 is day one of ownership and day 1 of having lived in the property as your primary residence.
Less than 2 years later you get PCS orders to another location with a reporting date of Dec 1, 2012. You'll be at least a month short on the 2 year requirement. (Actually more than a month in reality, since you have to allow for pack-out and travel time.) Let's say you want to take 30 days leave before your reporting date to, so you can visit family before reporting to your next duty station overseas. The HHG packout crew shows up on Oct 31st and packs you out, which means you're staying in a hotel that night, as your flight leaves on Nov 1st. Oct31st is the last day you lived in the property as your primary residence. So it was your primary residence for 669 days. You "WILL" qualify for a partial exclusion because your move is not your choice. The military is ordering you to relocate basically. The day count for period of time you owned the property stops on the day you depart the area, which is Nov 1st. So you've owned it for 770 days. Note that the day count for both residency and ownership is not extended. It is "suspended". You just top counting. The day counts will resume when any one of three things happens in the future.
1) The day you relocate to the area on a permanent basis for "any" reasons. (retirement, separation, PCS orders, etc.)
2) The day you retire or separate from the service.
3) Nov 1st, 2022. This is exactly 10 years after you departed the area.
The day counts resume when "any" "one" of the above 3 possibilities occurs.
