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deposited into petitioners' account at Washington Federal or
(2) know the amounts of such deposits that petitioner retained.
With respect to petitioner's deposits during 1989 and 1990
of Ms. Velilla's construction loan proceeds into petitioners'
account at Washington Federal, the contract between Ms. Velilla
and K & H, which was called and is hereinafter referred to as a
contractor agreement, set forth the terms and conditions for K &
H's disbursements of her construction loan proceeds. The con-
tractor agreement did not authorize petitioner (1) to deposit Ms.
Velilla's construction loan proceeds into petitioners' accounts
or (2) to retain any portion of those deposits for petitioners'
own purposes. That agreement specifically provided that dis-
bursements from Ms. Velilla's construction loan account were to
be made "only to pay for costs of labor on and materials for the
Project pursuant to plans and specifications submitted to and
approved by Lender."
During 1989, petitioners made the following disbursements
from their accounts: (1) Payments to K & H in the amount of
$474,467.56 and (2) payments of K & H expenses in the amount of
$6,584.06. During 1989, the aggregate amount of K & H's funds
and Ms. Velilla's funds that petitioner deposited into petition-
ers’ account at Washington Federal exceeded the aggregate amount
that petitioners paid to, or for the benefit of, K & H and Ms.
Velilla by $90,666.35.
During 1990, petitioners made the following disbursements
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