Taxation of primary residence

[Steven Solonch]

Hey all. I have a question that may seem like an easy one for some, so decided to give it a shot.

My mother in law recently sold her home. She was on the deed with her father who had passed away a year ago. She was on the deed for 2 years and change before the sale happened.

Originally, she was put on the deed for long term care planning ( in the event that her father needed to go into a nursing home). In the end, he did not, he passed and then my mother in law sold the property.

Because her father owned the home for 43 years, he purchased for 30k and she sold for 550k. Now being that there is no step up in basis(i think that may have applied if he left house to kids after he passed) being that he put her on deed during his lifetime.

Now when I read the IRS guidelines about personal residence exclusion, Im seeing that as long as you owned 2 of last 5 years you can get up to 500k exclusion if you are married which she is. However her husband is not on deed, and she didnt purchase it, was just added to the deed over 2 years ago. She has not taken this exclusion in last 2 years which would make her ineligible for such an exclusion. Can anyone offer insight on this? Much appreciated!!