SOP is for the title company, attorney or whoever is handling the closing to deduct the taxes from the proceeds and pay them.
HOWEVER, that doesn't mean that the real estate taxes are deducted from your capital gains. You still have to report the actual sales price. But taxes you pay are still deductible from income. Note that it's advantageous to deduct real estate taxes from regular income than from long-term capital gails, since capital gains tax is capped at 15 percent.