snakeair, thank you for sharing your point of view, but with all do respect I think you mistake Google indexed pages with backlinks. site:domain.com shows you the cache of pages that Google holds. For backlink check there is bunch of other tools, and the only one provided by Google itself is webmaster tool.
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If I bought that dropped domain and put up a new site on it which will have different content, different template....etc all the backlinks coming to that domain will now be 404 error pages since the content no longer exists.
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You partially right about 404 error witch easily can be fixed by 301 redirect from old 404 url to new pages, or buy simply removing that urls in webmaster tool and replacing by new pages in case that 404 urls didn't have backlinks, in case they did you easily can find these 404 urls in site:domain.com request and make new pages on the same urls and this way you will save existing backlinks to those pages. So eventually Google does not remove any backlinks at all. The only way I know where Google gets involved in affecting your backlinks is when you got under radar and then sent your site for reconsideration, only then they will close some backlinks that they consider spamy from juice flow to your site, and even then backlinks are not removed but, simply stopped from weight flow. I also heard from colleagues that after some time that prevention can be removed, but it takes from 6 to 18 month.
So my main point is: Google doesn't remove backlinks, it is simply not possible for them to do, they don't have access to any source of backlinks.
And second is: never send site for reconsideration in case your site just was lowered in position (being under some of the Google filters), because they will lower it even worse when you admit that something you did wrong. Speaking from my own experience.
From Where I can check the Dropped domains
Linear Mode
