Casualty Gain on Secondary Home (Former Primary Residence)

A friend of mine's secondary home (House A) had a fire in Feb 2025 because of aged electrical wiring. House A was more than 100 years old. It was purchased about 10 years ago with a basis of about 50K (no major improvement) and it was their primary residence until late 2023 when they bought their current primary residence (House B). Two weeks after they filed claim, insurance company cut them a check for150K for the damage. My friend bought another House C for $80K (part of insurance proceed).  Insurance company is willing to pay $8K more if my friend demolish the house, but they did not do it as it costs more than $8K to demolish a house. And my friend sold the damaged House A to a contractor for 4K. How is insurance procced and sale of house be reported on 2025 tax return? Is it basically my friend sold house A for 154K with a basis of 50K and they still qualify for section 121 exclusion because they lived them for 2 years out of 5 years? Thank you.