Fill in the blank with the most appropriate word. Carlos heard that you ________ in town.

The correct answer is: B. been

The sentence is in the past tense, so we need to use a past participle. The past participle of “be” is “been”.

The other options are not correct because they are not past participles.

• “Is” is the present tense of “be”.
• “Were” is the past tense of “be”.
• “Gone” is the past participle of “go”.

Therefore, the correct answer is “been”.