What is "capital gains tax" on real estate transactions?

Capital gains tax on real estate transactions refers specifically to a tax imposed on the profit, or capital gain, that results from the sale of a property. When a property is sold for more than its purchase price, the difference constitutes a capital gain, and it is this amount that is subject to taxation.

For example, if a homeowner bought a house for $200,000 and later sold it for $300,000, the capital gain would be $100,000. The capital gains tax would then be calculated based on that $100,000 profit rather than the total sale price of the property.

This distinction is vital in real estate transactions, as it affects how individuals and investors plan their finances when buying and selling properties. The other options provided do not correctly describe the nature of capital gains tax, as they focus on the sale price, property transfer, and rental income, none of which pertain to the profit realized from the sale of the property.