If owners sell their assets to a foreign entity that is not part of the family, they can claim a deduction for capital gains. Let's use an example where the sale price is $1 million, which would not be taxable. That is what is currently happening. In the case of farms or, as Mr. Kelly was saying, small businesses that are sold to foreign companies, the asset sale gives the right to a capital gains exemption.
If owners sell their assets to a company that belongs to their children, there is no such exemption, and the difference becomes a taxable dividend. So $1 million can mean they have to pay up to $400,000 in taxes. Therefore, selling assets to their children is not beneficial. If the farmer wants to do that, either the seller pays the tax or his children to whom he is selling his assets must get the money through the company. So we are talking about another $400,000 that will be taken from the farm operating revenues. Either the parent or the farm pays that $400,000. Either way, the money must come from somewhere. In general, the farm must pay that tax. On the other hand, if the owner sells to a stranger, there is no such cost. That $400,000 doesn't have to be paid. That is where the difference lies.