The way I see the lien payoff should not affect your gain or loss. say the property was worth $100 with the $25K lien which the buyer pays so you get $75K. However, your sales price is $100K. Why would this be treated differently than the payoff of any mortgage which if it existed also would not affect your gain/loss.
from the buyer's standpoint, they are not out $27500 cash. so would that increase their tax basis in the house? or are they really out of pocket with no current or future tax benefit.
the results should not differ if you sold the property and got the extra $27,500 but then had to pay off the lien.
