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liability to Northwest. The net balance in P-B No. 2 as of May
31, 1988, was zero. (See infra pp. 25-26.)
1987 Stock Market Crash
During October 1987, many stocks listed on the stock market
began to decline in value. Then, on October 19, 1987, the stock
market declined dramatically (stock market crash) resulting in
substantial decreases in value for many stocks. Petitioner had
purchased many of the stocks in the corporate accounts on margin,
and he was called upon to furnish additional margin. When he was
unable to meet the margin calls, the stocks were sold at a loss.
On its 1987 corporate return, IL NA Tours reported net losses of
$6,472,649, some of which resulted from losses incurred by the
corporate accounts following the stock market crash.
Northwest Ticket Recall Program
The tickets that consolidators wrote on Northwest ticket
stock were not easily distinguishable from ticket stock
originating from other sources. In 1987, Northwest decided to
redesign the ticket stock in order for consolidator tickets to be
more easily distinguishable. Consequently, in December 1987
Northwest began a recall of all old ticket stock (ticket recall
program). Under the terms of the ticket recall program, a
consolidator would not be issued new ticket stock until the
consolidator accounted for all old ticket stock. The ticket
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