What does capital gains tax apply to?

Capital gains tax specifically applies to the profit realized from the sale of non-inventory assets, such as real estate, stocks, and investments. When an asset is sold for more than its purchase price, the increase in value is considered a capital gain, which is then subject to taxation. This tax is calculated based on how long the asset was held before being sold—there are short-term and long-term capital gains rates, which differ depending on the holding period.

The other options do not accurately represent the scope of capital gains tax. Tax on all income sources pertains to a variety of income types without distinguishing between different forms of gain, making it broader than capital gains alone. Tax on property appraisal values is related to property taxation based on assessed value, not sales or profit realization. Lastly, tax on rental income is a different type of income tax that applies to earnings generated from leasing property, rather than profits from asset sales. This illustrates why option B is the most accurate representation of what capital gains tax applies to.