Mr. and Mrs. Snell own and live in a house, with an adjusted basis of \($300,000,\) that was purchased in 1999. The house is destroyed by a tornado on March 10 of the current year, and the Snells receive insurance proceeds of \($410,000.\) They purchase another residence for \($480,000\) four months later.

a. May they exclude the \($110,000\) gain, and if so, what is the basis of the residence purchased in July?

b. May they defer the \($110,000\) gain, and if so, what is the basis of the residence purchased in July?