Capital Gains Tax is best described as the tax on the profit from selling an asset, calculated as the difference between the sale price and the purchase price (plus/minus allowable costs).

• A. Tax on property transactions?
• B. Difference between sale price and purchase price (less costs)
• C. Tax on gifts
• D. Tax on rental income

Answer: (B)

Capital gains tax is charged on the profit you make from selling an asset, not on the full sale price. The profit, or gain, is calculated as the sale price minus the cost basis of the asset (the purchase price plus allowable costs such as acquisition costs and improvements), with selling costs often reducing the net sale price used in the calculation. This means the tax is based on the difference between what you sold it for and what you paid for it, after adjustments.

That aligns with the description in the statement: the tax is on the difference between the sale price and the purchase price (plus or minus allowable costs). For example, if you bought an asset for 100,000 and incurred 5,000 in buying costs, then sold it for 150,000 with 5,000 in selling costs, the gain would be calculated as net sale price (145,000) minus cost basis (105,000) = 40,000, and tax would apply to that 40,000 gain.

The other options refer to different taxes: a broad property transaction tax, a tax on gifts, and a tax on rental income, none of which describe capital gains tax.