He was an auditor in his 60s.

@D Mack Your seller is confused. 1) it’s CASH deposits over $10k that get reported, but they are simply recorded, they don’t trigger any audit or other scrutinization unless they are regular.

In the internal IRS hierarchy, Appeals officers are far better trained and more competent than the Compliance officers aka auditors.

Have you found any Propstream or Auditor lists tend to have people who are interested in selling their home this way?

An IRS auditor could well make the case that because all these people knew each other up front, and had these relationships and NDP became a DP after the loan was refinanced, that the intent all along was to conduct a prohibited transaction AND to disguise the transaction.Whoever "son" is, he really must not do this.

For example, in Ohio (see R.C. 5301.01):To be valid, a DEED must be:i) signed by the grantor;ii) the grantor must acknowledge the signature before an official (a judge, a clerk of court, a county auditor, a county engineer, a mayor, or a notary public)iii) the official shall certify the acknowledgement and sign a certificate of acknowledgementNote - a properly signed (but not recorded) deed is a valid transfer of real property - HOWEVER, without recording, there is little protection against 3rd party claims against the property - (I've seen cases where people sold the same piece of land to different buyers!)

I talked to an IRS auditor a couple of years ago and he said that with today's business models, the IRS recognized some time ago that it would be very common and they no longer necessarily use the home office as a leading indicator of the need for an audit.  

You can look up the property taxes on the Hamilton County auditors website (this is obviously assuming you buying in the Cincinnati market indicated in your profile).

I received a letter from the Marion County Auditor, Indianapolis, IN, stating that I've been receiving Homestead Deductions on some of my rental properties for over 3yrs, and now they are going to invoice me for the past three years, plus interest, and penalties.

Some of those stories appear to hinge on the auditor, how they interact with the auditor, and simply bad information.Thanks, Jason Watson