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Petitioners argue that for 1988 respondent erred in
reconstructing their income,10 and in including in income refunds
of $404 and other income of $7,036. For 1989, petitioners argue
that respondent erred in including in income refunds from Lucido
Insurance Agency of $481.05, and as other income a check from
Michael Larco for $150 because it was a loan repayment.
Petitioners have failed to prove that the disputed items for
1987, 1988, and 1989 were nontaxable. Refunds petitioner husband
received are includable in petitioners' income because they were
refunds for various items, such as insurance and utilities, that
petitioner husband deducted as business expenses. Petitioners
have not proved that cash deposits they made, several of which
exceeded $1,000, were from a nontaxable source. Petitioners did
not show that the payment from Larco was repayment of a loan.
Petitioners have failed to prove that respondent erred by
including in income for 1987 petitioners' use of the Earl Kiem
escrow account to pay personal expenses and their real property
expenses of $23,615. Sec. 301; Falsetti v. Commissioner, supra;
Henry Schwartz Corp. v. Commissioner, supra. However, as stated
above, we do not treat funds deposited to Americana's account as
income taxable to petitioners. We sustain respondent's
calculation of petitioners' unreported income for 1987, 1988, and
1989, except for the inclusion of the Americana funds in 1987.
10 Petitioners incorrectly omitted installment sales of
$9,017 from their calculation of their income for 1988.
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