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incorporated herein by this reference. At the time the petition
was filed in this case, petitioner resided in Lavallette, New
Jersey.
In November 1991, petitioner became an investor in CNC
Trading Company of Marlton, New Jersey (CNC). CNC was owned and
primarily operated by Charles N. Cugliari (Cugliari). CNC was
purportedly a food broker and distributor. Cugliari and CNC
salespeople sold “investments” in CNC “contracts” for
approximately $25,000 each. Contracts were also sold in half
shares for approximately $12,500 each. Cugliari and CNC
salespeople told investors who purchased contracts that CNC used
their money to purchase food products each month for subsequent
sale to food wholesalers and supermarket chains. CNC had
approximately 2,800 investors.
CNC sent cash or checks to its investors consisting of a
fixed amount of money each month that was represented to be half
of the profits made by CNC on its sales of food products. Unless
an investor specified otherwise, CNC would retain the investor’s
principal investment and continue paying that investor monthly
cash or checks. An investor could obtain the investor’s
principal investment back from CNC upon request.
CNC was operated so as to permit investors to evade the
payment of Federal income tax on the income they received from
CNC. CNC did not report to the Internal Revenue Service (IRS)
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