Oregon 30-Hour Real Estate Law Practice Test

Which term is defined as a tax that's applied when property changes ownership?

1. Property tax

2. Transfer tax

3. Sales tax

4. Capital gains tax

The correct answer is: Transfer tax

The term defined as a tax that is applied when property changes ownership is indeed the transfer tax. Transfer tax is specifically levied on the sale or transfer of real estate from one party to another. This tax is usually calculated based on the sale price of the property and is often assessed at the recording of the deed or the transfer of title. Understanding this concept is crucial for real estate professionals, as it influences both the financial aspects of real estate transactions and the obligations of buyers and sellers. In contrast, property tax is an ongoing tax levied on real estate owners based on the value of their property, while sales tax generally applies to the sale of goods and services but not directly to the transfer of real estate ownership. Capital gains tax is related to the profit earned from the sale of an asset, including real estate, but it is not specifically a tax applied at the moment of transferring ownership; rather, it is calculated when gains are realized from the sale. Thus, recognizing the unique definition of transfer tax is essential for understanding property ownership transactions.