Capital gains on tax lien sales

[Greg Rusianoff]

In my state, tax lien redemption is 1 year. 

If the property redeems in 1 year, and you get your money back and interest in longer than 1 year, can I treat the interest as a Long Term Capital gain?

Also, if I get the deed to the property, and not the interest, after 1 year. If I flip that property 1 month after the expiration of the redemption period, does the gain count as long term or short term? It would make sense that it is long-term, since I committed my money 13 months before getting the payoff - the money on the flip...

[Steven Hamilton II]

Originally posted by @Greg Rusianoff:

In my state, tax lien redemption is 1 year. 

If the property redeems in 1 year, and you get your money back and interest in longer than 1 year, can I treat the interest as a Long Term Capital gain?

Also, if I get the deed to the property, and not the interest, after 1 year. If I flip that property 1 month after the expiration of the redemption period, does the gain count as long term or short term? It would make sense that it is long-term, since I committed my money 13 months before getting the payoff - the money on the flip...

 The first question is are in the trade/business of tax liens. That can make a big difference in the answer.

This article should answer your question fairly well: http://www.parkertaxpublishing.com/public/tax-auctions-capital-gain.html