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During 1994, petitioner received distributions of $151,272
from CNC. On line 21 of petitioner's return for 1994, she
reported receiving $38,275 of miscellaneous investment income
from CNC.
Some time in 1994, after the 1993 return was filed,
petitioner called Mr. Zocks and asked "a general question
relating to when income from an investment should be reported."
As part of his preparation of petitioner's 1994 Federal income
tax return, Mr. Zocks assembled and mailed to her an "organizer",
or questionnaire, based upon information in the previous year's
return. Petitioner listed on the organizer her income from
different sources. Among the sources of income she disclosed on
the organizer for 1994 was "dividend" income from CNC of $38,275
that Mr. Zocks later listed on the return as "miscellaneous
investment income" because there was no Form 1099 reporting the
distribution. She provided no other details of the CNC
investment.
Late in 1994, petitioner asked for her invested money back
from CNC and was told in December of 1994 that she could get it
back "in three months". CNC became inactive in 1995 when Mr.
Cugliari fled to the Cayman Islands.
Eventually, the activities of CNC and its investors came to
the attention of the Internal Revenue Service (IRS). Petitioner
was one of the individuals whose income tax matters were placed
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