period Subsection (a) of section 121 is amended— (1) by striking 5-year period and inserting 8-year period , and (2) by striking 2 years and inserting 5 years . (b) Application to only 1 sale or exchange every 5 years Paragraph (3) of section 121(b) is amended to read as follows: (3) Application to only 1 sale or exchange every 5 years Subsection (a) shall not apply to any sale or exchange by the taxpayer if, during the 5-year period ending on the date of such sale or exchange, there was any other sale or exchange by the taxpayer to which subsection (a) applied. . (c) Phaseout based on modified adjusted gross income Section 121 is amended by adding at the end the following new subsection: (h) Phaseout based on modified adjusted gross income (1) In general If the average modified adjusted gross income of the taxpayer for the taxable year and the 2 preceding taxable years exceeds $250,000 (twice such amount in the case of a joint return), the amount which would (but for this subsection) be excluded from gross income under subsection (a) for such taxable year shall be reduced (but not below zero) by the amount of such excess. (2) Modified adjusted gross income For purposes of this subsection, the term modified adjusted gross income means, with respect to any taxable year, adjusted gross income determined after application of this section (but without regard to subsection (b)(1) and this subsection). (3) Special rule for joint returns In the case of a joint return, the average modified adjusted gross income of the taxpayer shall be determined without regard to any taxable year with respect to which the taxpayer did not file a joint return. . (d) Conforming amendments (1) The following provisions of section 121 are each amended by striking 5-year period each place it appears therein and inserting 8-year period : (A) Subsection (b)(5)(C)(ii)(I). (B) Subsection (c)(1)(B)(i)(I). (C) Subsection (d)(7)(B). (D) Subparagraphs (A) and (B) of subsection (d)(9). (E) Subsection (d)(10). (F) Subsection (d)(12)(A). (2) Section