What is inheritance tax?

Inheritance tax refers to the tax that is imposed on the estate of a deceased person before the assets are distributed to the heirs. This tax is calculated based on the value of the deceased's estate, which includes property, financial assets, and any other valuables that are part of the estate at the time of their passing. The amount of inheritance tax due can vary widely depending on the size of the estate and the relationship of the beneficiary to the deceased, as some jurisdictions offer exemptions or reduced rates for close relatives.

In contrast, the other options refer to different types of taxes. A tax on gifts given during one's lifetime pertains to gift taxes, which are applicable to significant gifts made while an individual is still alive. A tax based on an individual's income level relates to income tax, which is assessed on earnings and is unrelated to estate transfers after death. A tax levied on property transactions typically refers to property transfer taxes or stamp duties, which are charged when real estate is bought or sold, rather than imposed on the estate of a deceased individual. Thus, option C accurately distinguishes inheritance tax as specific to the assets and wealth of a deceased person, making it the correct choice.