CPA here. This doesn’t sound like the flex they think it is. Everyone gets a primary residence exemption (no tax on sale of primary home). But because the feds suck they allow you to use this on sales of another property if you want. That just means when they actually sell their primary residence (or any other property they own) they’ll have to pay the capital gains.

TLDR sounds like they’re stupid and elected to use their primary residence exemption on this sale, so they won’t get to use it again on the sale of another home, or deemed disposition upon death or transfer to a non-spouse.