  We show that as an electron transfers between closed-shell molecular
fragments at large separation, the exact correlation potential of
time-dependent density functional theory gradually develops a step and peak
structure in the bonding region. This structure has a density-dependence that
is non-local both in space and time, and even the exact ground-state
exchange-correlation functional fails to cap- ture it. In the complementary
case of charge-transfer between open-shell fragments, an initial step and peak
vanish as the charge-transfer state is reached. Lack of these structures in
usual approxima- tions leads to inaccurate charge-transfer dynamics. This is
dramatically illustrated by the complete lack of Rabi oscillations in the
dipole moment under conditions of resonant charge-transfer.
