Wow!  Thank You IRS!.  Effective January 1, 2008, IRC Section 121 was ammended.  Prior to the ammendment, individuals selling their principal residence were entitled to exclude $250,000 of gain from taxation and married couples could exclude $500,000.  Now, even if a married person’s spouse dies, the surviving spouse still get’s the benefit of the $500,00 exclusion within two years of the date of death of the spouse.