What does the capital gains tax apply to?

The capital gains tax applies specifically to the profit made from selling an asset, which includes real estate, stocks, bonds, or other investments. When an asset is sold for more than its original purchase price, the difference – or profit – is considered a capital gain. This gain is subject to taxation, with rates depending on how long the asset was held before the sale (short-term or long-term capital gains).

The other options pertain to different types of income that don't fall under the capital gains category. Income from employment is typically subject to ordinary income tax rates. Dividends from stocks represent earnings distributed to shareholders, which are taxed as dividends rather than capital gains. Interest from bank accounts is also considered ordinary income and taxed accordingly. Thus, the correct choice reflects the specific nature of capital gains taxation applied directly to the profits from selling an asset.