ANSWER:
Finally we have a break for a divorced "out spouse" who no longer resides in the home. [Technically, this would have caused the old law to be inapplicable; it applied only to sales of a principal residence, and even if the spouse moved out very recently, he could not use the 2 year rollover rule.]

The new law gives a big break to the "out spouse"; in a divorce, if either spouse qualifies, both may use the new law.

This allows a couple to wait many years before selling the house (perhaps the Divorce Decree says: "Sell the house when the baby reaches age 21.") and both ex-spouses can exempt $250,000 of profit, even if the sale took place 20 years after the ex-husband moved out and remarried.

For more information, see 1997 Tax Act
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