National Industrial Investors, Inc. - Page 3

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                  Category of deduction                     1989              1990                     
                  Depreciation ..................   $13,367.00    $13,180.00                           
                  Net operating loss carryover...   231,102.00    266,331.00                           
                  Interest.......................    19,010.46     20,236.32                           
                  Repairs........................       123.00   300.00                                
                  Rents..........................       940.00   850.00                                
                  Fees and expenses of C.M. Byrne III   276.72                500.00                   
                  Management fees of Charles Byrne      500.00      4,156.30                           
                  Insurance......................     4,084.00      2,353.00                           
                  Office expenses................       489.80         72.80                           
                  Telephone......................     1,028.00      2,173.00                           
                  Auto...........................     2,318.63      3,285.36                           
                  Travel.........................       166.00    -0-                                  
                  Professional services..........       370.00    -0-                                  
                  Dues and subscriptions.........    158.00   157.60                                   
                  (2)  Is petitioner liable for the accuracy-related penalty                           
            for negligence under section 6662(a) in the amounts of $2,457.00                           
            and $17,632.00 for 1989 and 1990, respectively?                                            
                  Some of the facts have been stipulated and are found                                 
            accordingly.  The stipulation of facts and attached exhibits are                           
            incorporated herein by this reference.                                                     
                                         FINDINGS OF FACT                                              
                  Petitioner, National Industrial Investors, Inc. (NII), is a                          
            California corporation.  Since its inception, its principal place                          
            of business, office address, and office address of all of its                              
            subsidiaries has been 956 Jackling Drive, Hillsborough,                                    
            California, the residence of Charles M. Byrne (Byrne).                                     
                  Byrne owned 51 percent of the stock of NII from 1972,                                
            shortly after NII's incorporation, until 1980, when he divided                             
            his interest among his wife and children.  A non-Byrne minority                            
            shareholder, McMahon, was bought out in early 1988, and when                               




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