What is capital gains tax applied to?

Capital gains tax is specifically applied to the profit generated from the sale of property or investments. This type of tax comes into play when an asset, such as stocks, real estate, or other investments, is sold for more than its purchase price. The gain realized from this transaction is subject to capital gains tax, which can vary based on factors such as the length of time the asset was held (short-term vs. long-term gains).

Earnings from employment are typically subject to income tax rather than capital gains tax. Similarly, taxable interest income is considered regular income and is not affected by capital gains taxation. In the case of gift tax scenarios, these are regulated under different rules and do not pertain to capital gains tax, which is focused solely on profits from capital assets sold. Thus, option B accurately reflects the application of capital gains tax.