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John Kenny Company, but also for Accu-Data on accounting and tax
preparation matters. Although Mr. Morris discussed his employ-
ment with petitioner in terms of the people with whom he worked,
he generally did not inform her about what he actually did in his
employment. Mr. Morris was not open with petitioner about his
financial affairs, and, when she questioned him about those
matters, he reacted negatively, causing her to discontinue that
line of inquiry.
Under the circumstances presented here, we find that it was
not unreasonable for petitioner, who had no involvement with
Accu-Data, to have believed that during the years at issue Accu-
Data generated significant funds from an accounting and tax
preparation business.25 We further find that, under those
circumstances, it was not unreasonable for petitioner to have
believed that during those years Meadows was capable of generat-
ing significant amounts of gross receipts from the sale of sand
and gravel.26 We have found that Mr. Morris controlled the
affairs of Meadows during the years at issue, that petitioner was
not involved in its day-to-day operations during those years, and
that she was not in a position to know how much income Meadows
25 In fact, Accu-Data reported gross receipts of (1) $35,210 and
$31,687 in its Forms 1120-A for its taxable years ended June 30,
1987, and June 30, 1988, (2) $20,647 in its Form 1120S for its
short taxable year July 1 through Dec. 31, 1988, and (3) $6,000
in its Form 1120S for its taxable year 1989.
26 In fact, Meadows reported $22,482 and $86,355 of gross re-
ceipts in the Forms 1120S that it filed for 1988 and 1989.
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