What does the term "wealth transfer tax" refer to?

The term "wealth transfer tax" specifically refers to taxes imposed on transferring wealth through gifts or inheritance. This category of tax is designed to address the transfer of assets from one individual to another, typically occurring upon death (inheritance) or during an individual’s lifetime (gifts). Wealth transfer taxes encompass estate taxes and gift taxes, which are both mechanisms used by governments to tax the value of what is passed on to heirs or beneficiaries.

In contrast, taxes imposed on income earned through investments focus on the earnings generated by investments rather than the transfer of wealth. Tax levied on property sales relates to the transaction of selling real estate and does not involve wealth transfer in the context of gifting or inheritance. The tax on capital gains from asset appreciation deals with profits realized from the sale of assets and is also separate from the concept of transferring wealth. Therefore, the option that focuses on the specific context of wealth transfer—gifts or inheritance—is the correct understanding of the term "wealth transfer tax."