@dascpa Where are you finding two years out of five, for Section 121 to apply?  I don't get past the first paragraph.  

Section 121(a) Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.