What type of tax is applied to the fair market value of a property at the time of death?

The estate tax is levied on the total value of a deceased person's assets at the time of their death. This includes real estate, personal belongings, and various other properties. The key aspect that differentiates the estate tax from other taxes is that it is assessed based on the fair market value of the entire estate rather than the income generated from these assets.

The estate tax occurs when the value exceeds a specific exemption limit set by the government, meaning that potentially significant assets can be subject to taxation. This tax is intended to ensure that as wealth transfers from one generation to the next, a portion is available for public funds.

In contrast, income tax would apply to earnings and investments accrued during a person’s lifetime rather than the value of their estate at death. Capital gains tax is incurred when assets are sold for more than their purchase price, applying to the gain realized on the sale rather than the value at death. Property tax, on the other hand, is an ongoing tax based on the ownership of real property and is assessed annually, not contingent on the property owner's death.

Thus, the correct identification of the estate tax aligns perfectly with its definition and the context provided in the question.