What does capital gains tax apply to?

Capital gains tax specifically applies to profits made from the sale of non-inventory assets. When an individual sells an asset such as real estate, stocks, or other investments for more than its original purchase price, the profit realized from that sale is considered a capital gain and is subject to taxation. This type of tax reflects the increase in value of an asset over time and is distinct from other forms of income, as it is based on the appreciation in value rather than regular earnings or revenue streams.

The other options relate to different aspects of taxation: A pertains to general income tax, which encompasses all income sources; C relates to property taxes based on assessment values, and D concerns ordinary income derived from rental properties. These options highlight different tax principles and do not align with the specific nature of capital gains tax.