Part 3 Independent of "Part 2", Kathy and Andrew own and operate EA, LLC. The company balance sheet shows assets as of today as follows: Fair Market Adjusted Basis Accounts receivable Inventory Equipment (Cost = $42,000) Goodwill Value $60,000 $60,000 $27,000 $35,000 $18,000 $25,000 $220,000 $0 $325,000 $120,000 Kathy owns 60% of the profits, losses and capital; Andrew, 40%. Kathy sold her 60% interest to Glenn for $195,000 cash. a. What is the effect of this sale to the partners and the partnership? b. How is the partnership ordinary (taxable) income of $36,000 for its calendar year 2023 allocated between the Kathy, Glenn, and Andrew? Assume the sale occurred on October 1, 2023. Consider § 706(d) and Reg. § 1.706-4(a) and (d). Explain.

Fig: 1