Whatever backlinks dropped domains had won't count toward ranking. Backlinks get reset. This has been the case for several years now. Previous to the change the backlinks would acquire whatever PageRank they formerly had prior to the drop. After the change, which happened quite a few years ago, the backlinks got reset.
This change also affected typos with pre-existing backlinks. The pre-existing backlinks get reset.
I'm not saying you can't rank a dropped domain. Just that the backlinks get reset and this has been going on for years now. I remember when it happened, it was literally like overnight the expired domain market changed. I was fairly active buying dropped domains until this change happened. If I buy an expired domain nowadays it's for whatever traffic the links may bring, not for the equity.
There are some domain transfers ( e.g. genuine purchases of companies) where it can make perfect sense for links to transfer. But at the same time it wouldn’t make sense to transfer the links from an expired or effectively expired domain, for example. Google (and probably all search engines) tries to handle links appropriately for domain transfers.
Adding further, he said:
The sort of stuff our systems would be designed to detect would be things like someone trying to buy expired domains or buying domains just for links.