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Petitioner William N. Kellahan, Jr. (petitioner) had been
engaged in the purchase of properties at tax sales since the
early 1980’s, as a member of a partnership by the name of DAK,
which consisted of W. W. Dibble, Harry R. Askins, Jr., and
petitioner. DAK generated income by purchasing properties at tax
sales and selling them back to the previous owners, thereby
collecting redemption fees. If a property owner was delinquent
in paying property taxes, the county could seize the property and
sell it. The property would be sold at auction to the highest
bidder, whose bid would include the delinquent taxes and
penalties. The delinquent taxpayer would have 12 months in which
to reacquire or “redeem” the property, by paying the delinquent
taxes and penalties plus an additional fee equal to 8 percent of
the bid amount. If property sold at auction was redeemed during
the redemption period, the purchaser at auction would receive a
refund of his bid price plus the 8-percent redemption fee; if
there was no redemption, the auction purchaser would acquire
title.
DAK’s principal objective in engaging in the tax sale
purchases was to collect the 8-percent redemption fees, which
were distributed to the partners. Approximately 80 to 85 percent
of the properties purchased by DAK were redeemed. Properties
that were not redeemed would be distributed by DAK to the
individual partners, who would attempt to sell them at a gain.
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Last modified: May 25, 2011