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At a minimum, the seller must declare the interest income received. Was this the seller's primary residence, or a rental or business property?
If the property was rental real estate, it may be subject to depreciation recapture and or capital gain due to the sale. In addition, any property taxes allocated to the property up to the sale date would be a deduction against the rental income prior to the sale.
If the property was personal residence, the only tax would be the property tax allocated to the seller up to the sale date. The property tax could be deducted as itemized deductions on schedule A of form 1040. If the property had a large gain, capital gain may have to be reported but this is not normal since you can write off up to $500,000 if married.
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