Practice Test Geeks(CIA) Certified Insurance Appraiser Practice Test
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Tax Planning & Compliance Flashcards

7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Tax Planning & Compliance flashcards as text

  1. Under IRC Section 1033, a taxpayer who receives insurance proceeds from an involuntary conversion must reinvest within how many years to defer gain recognition on business property?

    Answer: 3 years

    IRC Section 1033 generally requires replacement of involuntarily converted business property within 3 years after the close of the tax year in which gain is realized.

  2. A homeowner receives a $200,000 insurance settlement for fire damage to a home with an adjusted basis of $150,000. If they do NOT reinvest under Section 1033, how much gain must they recognize?

    Answer: $50,000

    The recognized gain equals insurance proceeds minus adjusted basis: $200,000 − $150,000 = $50,000.

  3. Which IRS form is used to report casualty and theft losses for individuals?

    Answer: Form 4684

    Form 4684 (Casualties and Thefts) is used by individuals to calculate and report deductible casualty and theft losses.

  4. After the Tax Cuts and Jobs Act of 2017, personal casualty loss deductions for individuals are generally limited to losses arising from:

    Answer: Federally declared disasters only

    The TCJA suspended the personal casualty loss deduction for 2018–2025 except for losses attributable to a federally declared disaster.

  5. Business interruption insurance proceeds received by a sole proprietor are generally treated for tax purposes as:

    Answer: Ordinary income replacing lost profits

    Business interruption proceeds replace lost taxable profits, so they are taxable as ordinary income in the year received.

  6. A corporation pays premiums on a key-person life insurance policy where the corporation is the beneficiary. How are those premiums treated for tax purposes?

    Answer: Not deductible

    Premiums on key-person life insurance where the employer is the beneficiary are NOT deductible under IRC Section 264(a)(1).

  7. The individual threshold rule for deducting personal casualty losses (when allowed) requires the loss to exceed what percentage of adjusted gross income after the $100 per-event floor?

    Answer: 10%

    Personal casualty losses must exceed a $100-per-event floor and then 10% of AGI before any deduction is allowed.