What situations apply to the nontax avoidance exception?

Generally, the nontax avoidance exception will apply to the second disposition if:

• The second disposition was involuntary (for example, a creditor of the related party foreclosed on the property or the related party declared bankruptcy).
• The second disposition was an installment sale under which the terms of payment were substantially equal to or longer than those for the first sale. However, the resale terms must not permit significant deferral of recognition of gain from the first sale (for example, amounts from the resale are being collected sooner).