Curious about personal capital gain exclusion on 2 year sale.

[Jim Burns]

I was under the impression that 2 years was an all or nothing rule for the capital gains exclusion on your primary, but apparently that's not the case. Does anyone know if this prorated system was just proposed or is it actually law? Quote taken from here: http://www.irs.gov/uac/IRS-Issues-Home-Sale-Exclusion-Rules

For qualifying sellers, the maximum exclusion amount of $250,000 ($500,000 for a married couple filing jointly) is limited to the percentage of the two years that the person fulfilled the requirements. Thus, a qualifying seller who owns and occupies a home for one year (half of two years)