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account. Neither petitioner nor IL NA Tours reported this
dividend income on their 1988 returns.
Petitioner’s P-B No. 2 account, into which the Pan Am stock
was transferred on April 11, 1988, had had a net balance of
$273,855 on March 31, 1988. The Pan Am stock in P-B No. 2 was
sold in two portions in April and May 1988. Petitioner sold
30,000 shares on April 22, 1988, for a net of $77,246 and the
remaining 10,000 shares on May 20, 1988, for a net of $26,897.11
Numerous other transactions occurred in P-B No. 2 during March
through May 1988. The net balances in P-B No. 2 were $305,642
and zero as of April 30 and May 31, 1988, respectively.
January 1988 Agreement With Northwest Regarding Back Debt
In furtherance of its ticket recall program, Northwest
advised petitioner on January 21, 1988, that as of that date its
records indicated that the NA Tours companies owed Northwest a
net of $3,231,921 (back debt), and it requested that petitioner,
individually and as president of IL NA Tours, enter into a letter
agreement with Northwest (January agreement) providing for
periodic payment of the back debt. At that time, Northwest’s
ticket recall program was not complete. Petitioner agreed to
Northwest’s proposal. When he signed the January agreement on
11 Thus, Pan Am stock purchased for $116,600 was sold for a
total of $104,143. Neither petitioner nor IL NA Tours reported
any loss from the sale of the Pan Am stock on their 1988 returns.
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