R. Paul Kropp - Page 9

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          II. Additions to Tax and Accuracy-Related Penalty                             
               Because we have concluded that the $81,000 did not                       
          constitute taxable compensation and the parties have made various             
          concessions, they will have to determine in their Rule 155                    
          computations whether Paul or Lorna has an underpayment of tax so              
          that the additions to tax pursuant to sections 6651(a)(1) and                 
          6654 still apply to Paul and the accuracy-related penalty                     
          pursuant to section 6662 still applies to Lorna.                              
               For purposes of the section 6651(a)(1) addition to tax                   
          calculation, Paul does not argue that the “reasonable cause and               
          not due to willful neglect” exception applies, and we conclude                
          that the exception does not apply in the instant case.  With                  
          regard to the section 6654 addition to tax, Paul argues on brief              
          that the exception listed in section 6654(e)(1) applies.  The                 
          section 6654(e)(1) exception is computational, and we leave it                
          for the parties to compute.                                                   
               As for the section 6662 accuracy-related penalty, Lorna                  
          argues that she acted in good faith and that she did not engage               
          in negligence or disregard of rules or regulations.  Because                  
          Lorna has failed to present any evidence with regard to the                   
          underpayment (if any) associated with the items of income                     
          conceded, we conclude that the section 6664(c)(1) exception (for              
          reasonable cause and good faith) does not apply.                              
               To the extent not herein discussed, we have considered the               

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