The Insurance Mechanism

question 20

Multiple Choice

The insurance mechanism:

• A) redistributes the cost of insured losses
• B) intends to make profits for social insurance policies
• C) only applies to private insurance companies
• D) is defined by law

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Definitions:

Gift

Something voluntarily transferred by one person to another without compensation.

Short-term Capital Loss

A loss realized from the sale or exchange of a capital asset held for one year or less.

Long-term Capital Gain

Profit from the sale of an asset held for more than one year, typically taxed at a lower rate than regular income.

Section 1245

A section of the tax code that involves recapturing depreciation on certain types of property as ordinary income upon sale.