In August 2002, a firm purchased a bulldozer $40,000. It was subsequently sold in January 2005 for $28,000. Assume that the firm has a December 31 year end, the firm is in a 40% tax bracket, the CCA rate for the equipment is 30% and that there were no other assets in the class. CCA was claimed for 5 years.

For 2005, what are the tax consequences of the disposition?

A Terminal loss of 11,340

B CCA recapture of 16,660

C CCA recapture of 11,340

D Capital gain of 12,000