LO.4 Ben owns a beach house (five years) and a cabin in the mountains (four years).

His adjusted basis is $280,000 in the beach house and $315,000 in the mountain cabin.

Ben also rents a townhouse in the city where he is employed. During the year, he occupies each of the three residences as follows:

Townhouse 120 days Beach house 170 days Mountain cabin 75 days The beach house is close enough to the city so that he can commute to work during the spring and early fall. While this level of occupancy may vary slightly from year to year, it is representative during the time period that Ben has owned the two residences.

As Ben plans on retiring in several years, he sells both residences. The mountain cabin is sold on March 3, 2012, for $540,000 (related selling expenses of $30,000). The beach house is sold on December 10, 2012, for $600,000 (related selling expenses of

$36,000).

a. Calculate Ben’s lowest recognized gain on the sale of the two residences.

b. Assume instead that both residences satisfy the two-year ownership and use tests as Ben’s principal residence. Because the mountain cabin is sold first, is it possible for Ben to apply the § 121 exclusion to the sale of the beach house? Why or why not?