How is capital gains tax defined in relation to real estate?

Capital gains tax is defined as a tax imposed on the profit that an individual realizes from the sale of real estate or other assets that have appreciated in value. When a property is sold for more than its purchase price, the difference between the sale price and the original purchase price is considered a capital gain. This gain is subject to taxation, hence the term "capital gains tax."

In the context of real estate, understanding capital gains tax is crucial for sellers, as it directly impacts the financial outcome of a property sale. For example, if a homeowner bought a property for $200,000 and sold it for $300,000, the capital gain would be $100,000, and the tax would apply to this amount based on current tax laws.

The other options relate to different aspects of real estate taxation. Rental income is subject to income tax rather than capital gains tax. The property value at purchase pertains to the investment basis rather than the profit realized upon sale. A fee for transferring property ownership might involve other expenses such as closing costs but does not relate to the gain made from selling a property. Understanding capital gains tax is essential for property owners and investors when considering the sale of their real estate investments.