Question

When property (other than marketable securities) is sold to a related person on the installment method, which of the following will cause the seller to recognize the remainder of the gain on the installment obligation before all payments are received?

The seller dies.

The buyer resells the property more than 2 years later.

The buyer dies.

The buyer gives the property away within 2 years of the installment sale.

Answer 1

As

Two years rule says that if the transaction is between two related parties on installment and the buyer related party dispose off the property within two years of acquiring the property to some unrelated buyer, in such case it will be treated as direct sale by original related seller and unrelated buyer hence whole gain is recognized by the original seller.

Hence answer is

The buyer gives the property away within 2 years of the installment sale.