We present the results of reconstruction analysis of the galaxy distribution in a spherical region of radius 50 Mpc/h centered on the Local Group, as mapped by the IRAS Point Source Catalog Redshift Survey (PSCz). We reconstruct it using 15 different models for structure formation in the universe, each consisting of a set of assumptions regarding the value of the density parameter Omega_m, and the amplitude and nature of the biasing between IRAS galaxies and mass. For every model, we also reconstruct ten mock PSCz catalogs derived from the outputs of numerical simulations that have the appropriate assumptions about Omega_m and bias. We use a variety of statistics to compare the accuracy of each reconstruction of the PSCz catalog to the accuracy expected based on the corresponding mock catalog reconstructions. We find that gravitational instability of Gaussian mass density fluctuations can account for the galaxy distribution in the PSCz catalog, at least for some plausible assumptions about the value of Omega_m and the bias. Unbiased models in which IRAS galaxies trace mass fail to reconstruct the PSCz catalog accurately, both for Omega_m=0.4 and for Omega_m=1. Low Omega_m models in which IRAS galaxies are antibiased with respect to the mass are the most successful in reconstructing the PSCz catalog. In particular, a model with Omega_m=0.4 and IRAS galaxies related to the mass according to the predictions of a semi-analytic galaxy formation model is very successful in reconstructing the PSCz galaxy distribution.