Capital Gains Tax Exclusion - parents and children?

[Dan N.]

We read that there is a capital gains tax exclusion of $250,000 per person. My wife and I bought a home 40 years ago for just a few thousand dollars and the home is now worth $4 million. My three children are on the deed of our house, so there are five people total along with my wife. We have all been living in this house since COVID started and we want to sell it in the next year or so. Is it true that if all my children stay living in the home for a total of two years (plus owning it for more than two years as co-owners), then all five of us can each get $250,000 exempted from capital gains tax when we sell the house?

And if my wife and I purchase a new house with these proceeds, since we are over 55 years old, what happens if we buy a house that is more expensive than the portion of the house that we own and are living in now? We own about 50% of our current house, which comes out to about $2 million.