What is one key feature of capital gains tax?

The key feature of capital gains tax is that it addresses profits from assets that have been sold. When an asset is sold for more than its purchase price, the profit, referred to as a capital gain, is subject to taxation. This form of tax is typically applied to investments such as stocks, real estate, and other capital assets. The fundamental principle behind capital gains tax is to tax the increase in value that an asset has accrued over time when it is sold.

The other choices do not accurately describe the nature of capital gains tax. While dividends are subject to taxation, capital gains tax specifically pertains to gains realized upon the sale of investments, making it distinct from dividend taxation. Furthermore, capital gains tax rates can vary depending on the type of asset and the holding period, meaning that it is not necessarily a flat rate for all corporations. Lastly, capital gains tax is not concerned solely with losses; rather, it applies to the gains realized from the sale of an asset, while losses may be treated differently for tax purposes.