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market value of your real estate securing the loan if
you sell it within 10 years of the agreement. FmHA can
never recapture more than it wrote off.
Petitioners elected to proceed with the buyout at net
recovery value. In order to do so, they obtained a loan from the
State Bank of Mt. Horeb. On July 30, 1996, petitioners paid to
FmHA the net recovery value of $92,057. Prior to the making of
this remittance, the balance owed by petitioners to FmHA was
$269,829.28. In exchange for the payment, FmHA wrote off the
remaining $177,772.28 of indebtedness.
Then, on July 31, 1996, petitioners and FmHA entered into a
Net Recovery Buyout Recapture Agreement. Pursuant to this
agreement, petitioners covenanted as follows:
If I/we do sell or convey any part or all of this
real estate within 10 years of this agreement, I/we
must pay FmHA the recapture amount for that part sold
or conveyed which is the smaller of a., b., or c.
a. The Fair Market Value of the real estate
parcel at the time of the sale or conveyance, as
determined by an FmHA appraisal, minus that portion of
the recovery value of the real estate * * * or
b. The Fair Market Value of the real estate
parcel at the time of the sale or conveyance, as
determined by an FmHA appraisal, minus the unpaid
balance of prior liens at the time of the sale or
conveyance, minus the net recovery value of the real
estate * * * if this amount has not been accounted for
as a prior lien, or
c. The total amount of the FmHA debt written off
for loans secured by real estate. I/We agree that this
amount is the outstanding balance of principal and
interest owed on the FmHA Farmer Programs loans(s) as
of the date of this agreement * * * [without taking
into account the related payment of recovery value],
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