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On April 6, 1989, a deposit of $21,000 attributable to a
check drawn on the MCIC account was made into the Meadows account
at the Champaign National Bank. A $10,000 check drawn on that
Meadows account and payable to Mr. Morris cleared that account on
April 17, 1989. That $10,000 check and a $16,500 check drawn on
the MCIC account and payable to Mr. Morris were deposited on
April 14, 1989, into the Bloomington Federal account. On April
26, 1989, a $23,000 check drawn on the Bloomington Federal
account was deposited into the Meadows account at the Champaign
National Bank.
We are not persuaded by, and are unwilling to rely on, Mr.
Morris' testimony or the purported reconciliation that he pre-
pared to establish that the gross receipts of Meadows shown in
the Form 1120S that it filed for 1989 were overstated by $10,000.
In this connection, it is not clear to us that $10,000 of the
$23,000 deposited into the Meadows account on April 26, 1989, was
the same $10,000 previously deposited into and thereafter dis-
bursed from that account.
Based on our review of the instant record, we find that
petitioner has failed to prove that the gross receipts, and
therefore the ordinary income, of Meadows for 1989 were over-
stated by $10,000 in the Form 1120S that it filed for that year.
We further find that petitioner and Mr. Morris underreported by
$10,000 their gross income from Meadows for that year. We
therefore sustain respondent on this issue.
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