Mr. and Mrs. Stell own and live in a house, with an adjusted basis of $350,000, that was purchased in 1997. The house is destroyed by a tornado on May 10 of the current year, and the Stells receive insurance proceeds of $470,000. They purchase another residence for $520,000 four months later. Read the requirements. a. May they exclude the $120,000 gain, and if so, what is the basis of the residence purchased in September? OA. Yes, they may exclude the gain under Sec. 121. OB. No, they may not exclude the gain. OC. Yes, they may exclude the gain under Sec. 1031. OD. Yes, they may exclude the gain under Sec. 1033. The basis of the residence purchased in September is b. May they defer the $120,000 gain, and if so, what is the basis of the residence purchased in September? A. No, they may not defer the gain. The Stells cannot exclude the gain under Sec. 121. OB. Yes, they may defer the gain under Sec. 1031 as an involuntary conversion. The Stells should defer the gain under Sec. 1033. O C. Yes, they may defer the gain under Sec. 1033 as an involuntary conversion, but the Stells should exclude the gain under Sec. 121. OD. No, they may not defer the gain. The Stells can exclude the gain under Sec. 121. If they defer the gain, the basis of the residence purchased in September is