The Brown Company was incorporated on January 2, 2018 and has 10 stockholders. The Brown Company is a law firm. The Brown Company's address is 7900 W. Division Street; River Forest, Illinois 60605. Its employer identification number is 12-3456789, its business activity code is 541110. The Brown Company uses the accrual basis of accounting and a calendar year for tax reporting purposes. Legal fees earned were $500,000. Salary expense was $300,000. Employee fringe benefits were $74,321. Entertainment expense (nondeductible) was $7,000. Interest expense was $9,000. The Brown Company received $1,000 in interest on tax-exempt securities, $3,000 in dividends from less than 20% owned domestic corporations, and $4,000 in interest on taxable securities. The Brown Company's depreciable property consists of computers (5-year property) that were purchased on January 20, 2018 for $20,000, computers that were purchased on March 15, 2020 for $10,000, office furniture (7-year property) that was purchased on January 20, 2018 for $40,000, office furniture that was purchased on March 15, 2020 for $30,000, and an office building that was purchased on February 10, 2020 for $250,000. $50,000 of the purchase price of the office building was assigned to the land. The Brown Company uses the statutory percentage under MACRS for the computer and the office furniture. The Brown

Company does not use the election to expense of the bonus depreciation. The Brown Company uses MACRS depreciation for book purposes. The Brown Company reported a book income before taxes of $95,000 during 2020. The Brown Company paid a dividend of $45,000 to its

stockholders during 2020.

The comparative balance sheet of the Brown Company on December 31, 2007 and December 31, 2008 appears below.