Paralegal Advanced Competency Exam (PACE) Practice Exam 2025 - Free PACE Practice Questions and Study Guide

The inheritance tax is specifically imposed on property and assets inherited from a decedent. This tax is calculated based on the value of the assets that are passed on to beneficiaries upon the death of an individual. It applies to the transfer of wealth and is designed to tax the beneficiaries who receive the property rather than the estate itself, although some jurisdictions may have an estate tax in addition to or instead of an inheritance tax.

In contrast, income earned during a lifetime is subject to income tax, not inheritance tax, as it relates to earnings generated by individuals while they are still alive. Gifts made to living individuals fall under gift tax regulations, which tax the donor at the time of the gift, rather than taxing the recipient under inheritance tax rules. Property sold during a person's life does not trigger an inheritance tax, as this tax is solely focused on the transfer of assets upon death, rather than transactions that occur while the person is alive. Thus, the correct choice accurately reflects the focus of inheritance tax legislation.