L. Ben Smith & Carol Smith - Page 2

                                        - 2 -                                         
                                              Accuracy-Related Penalty                
                Year         Deficiency       Under Sec. 6662(a)                      
                1999          $16,935                $3,387.00                        
                2001          17,586                 3,517.20                         
               The only issue remaining for decision is whether petitioners           
          are liable for 2001 for the accuracy-related penalty under                  
          section 6662(a).  We hold that they are.                                    
                                  FINDINGS OF FACT                                    
               All of the facts in this case, which the parties submitted             
          under Rule 122, have been stipulated by the parties and are so              
          found.                                                                      
               Petitioners resided in Hermiston, Oregon, at the time they             
          filed the petition in this case.                                            
               Starting around June 1998, L. Ben Smith (Mr. Smith) began              
          working for Raytheon Demilitarization Company (Raytheon) on                 
          Johnston Island.  Around April 1998, shortly before Mr. Smith’s             
          employment with Raytheon began, Mr. Smith attended an orientation           
          session presented by Raytheon (Raytheon’s orientation session).             
          During Raytheon’s orientation session, Raytheon orally informed             
          Mr. Smith that Johnston Island was not tax exempt and that he was           
          to be liable for tax on the compensation that he earned while               
          working on Johnston Island.  Around June 1, 1998, after                     
          Raytheon’s orientation session, Raytheon issued a so-called                 


               1(...continued)                                                        
          tice and Procedure.                                                         





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