Certainly two people can each have a primary residence; but by definition not more than one residence can be the primary residence of one person at any one time.
You may be aware that you can exclude the capital gain on the sale of a primary residence if you owned and occupied that home for any two year period (not necessarily consecutive) prior to the date of sale.
The exclusion is for up to $250,000 for a single filing status and up to $500,000 for a married filing joint filing status. The full exclusion up to $500,000 for a married filing joint return can apply if only one spouse satisfies the two year period for owning and occupying within the last five years rules. That is, you can own it and she can occupy it.
You will have to report a taxable gain to the extent that you have deducted or were allowed depreciation on the home while it was rented.
If you can close the sale of the home she is living in and meet the two year period using either her or your occupancy that should allow most of the gain (except depreciation allowed) to be excluded from income IF you file jointly for the year of the sale.
I hope this helps to know either spouse can own and occupy to apply the primary residence exclusion from income.
You can use the link http://www.justanswer.com/profile.aspx?PF=3653323&FID=0
to ask a question directed to me in the future.
You also can bookmark or save this answer page as a favorite to return to this page in the future.
Thank you for the opportunity to be of service.
Almost always it will be best to file jointly if you can both agree to do it together.
There are a few cases it might be better to file two returns; but that is only if you did not live together at all in the last six months of 2009 and you do have dependent children.
I hope this helps.