Final answer:
The cash received from the exchange of real property that is subject to tax is called a 'capital gain'. This is the profit made from selling the property at a higher value than its original purchase price, minus any outstanding debts against the property.
Step-by-step explanation:
When a taxpayer receives cash in exchange for real property, the correct term for this cash, which is subject to tax, is capital gain. Capital gains are profits from the sale of property or an investment. In the context of housing or other tangible assets, these gains represent the increase in the value of the property that is realized upon its sale. If a homeowner originally buys a house for $200,000 and over time the market value of the house increases to $250,000, the $50,000 increase is considered a capital gain. This is separate from equity, which is the value of the homeowner's interest in the property after any debts have been subtracted. For instance, if the homeowner has an outstanding mortgage of $100,000 on a house valued at $250,000, their equity is $150,000. Local governments often collect property taxes, which are based on the value of real estate owned by individuals or corporations.