What does 'Capital Gains Tax' apply to?

The correct answer is that Capital Gains Tax applies to the profit made from selling an asset that has increased in value. This tax is specifically levied on the gain realized when an individual or business sells a capital asset for more than its original purchase price. The concept revolves around the idea that the increase in value that the owner realizes at the time of sale is a form of income, thus subject to taxation.

This tax typically includes a variety of asset types, such as stocks, bonds, real estate, and other investments. The rate of Capital Gains Tax can vary depending on various factors, including the length of time the asset was held and the individual's overall income.

The other options do not relate to Capital Gains Tax: a tax on salaries pertains to income tax and is based on earnings from employment, while a tax imposed on regular income is also associated with income tax but does not consider capital appreciation. Lastly, a tax on inheritances pertains to inheritance tax, which is a separate matter altogether, dealing with taxes applied to the transfer of wealth after someone’s death.