You use a car in a majority of your sole-proprietorship engineering consulting business. This business asset cost you $80,000 new and has been depreciated according to MACRS over a 5-year period. At the end of year 4, you bought a replacement vehicle and sold the old one on Craigslist.org for $15,000.

a) Determine if depreciation recapture or a capital loss is present and, if so, how much.

b) If Te = 25% what is the effect on CFAT?. (i.e. increase/decrease and by how much?)