Lloyd owns a beach house (four years) and a cabin in the mountains (six years). His adjusted basis is $300,000 in the beach house and $315,000 in the mountain cabin. Lloyd also rents a townhouse in the city where he is employed. During the year, he occupies each of the three residences as follows:

Town house .........................    135 days
Beach house ........................  155 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 summer. While this level of occupancy may vary slightly from year to year, it is representative during the time period that Lloyd has owned the two residences.

As Lloyd plans on retiring in several years, he sells both the beach house and the mountain cabin. The mountain cabin is sold on March 3, 2017, for $540,000 (related selling expenses of $35,000). The beach house is sold on December 10, 2017, for $700,000 (related selling expenses of $42,000).

a. Calculate Lloyd’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 Lloyd’s principal residence. Because the mountain cabin is sold first, is it possible for Lloyd to apply the § 121 exclusion to the sale of the beach house? Why or why not?