Certified Government Financial Manager (CGFM) 2025 – 400 Free Practice Questions to Pass the Exam

Real property is classified as a wealth tax because it is based on the value of owned assets, namely land and buildings. Wealth taxes are levied on the net worth of an individual or entity, which includes property holdings. In the context of real property, this tax reflects the ownership of tangible assets, and is typically assessed annually by local governments.

This classification focuses on the concept that individuals’ wealth is not solely derived from income but also from the assets they own, such as real estate. As the value of properties can appreciate or depreciate, the amount of tax burden can vary accordingly, making it an ongoing form of taxation that aligns with the concept of wealth accumulation.

The other options represent different types of taxes that do not apply to real property in the same manner. Income tax is based on earnings; transaction tax is applied to the sale of goods and services; and assessment tax is often a term confused with property tax, specifically referring to a process used to determine the value of properties for taxation purposes rather than the tax itself.