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I am a private investor who has invested in individual stocks for over a decade. I have a BBA from the University of Texas at Austin. I am retired and living off of dividends and distributions from a portfolio of BDCs, consumer staple stocks, MLPs, regional banks and REITs.
  • A Warning To Potential KMP Purchasers Who Use CPAs 4 comments
    Aug 15, 2014 11:33 AM | about stocks: KMP, EPB

    Like most MLP unit holders, my taxes are turned in later than usual. My filings were done last week for tax year 2013. During 2013, my units with CPNO merged with KMP. My CPA - who usually provides his serves at reasonable fees - noted that there was $700 extra charge for the time spent calculating the changing basis on that transaction. That was close to 20% of the total tax prep bill. The run rate annual distribution on that small investment (it was slightly less than 1% of my total investments) was close to $800. So I lost 87.5% of that 2013 cash flow (or "distributions") from tax prep costs alone.

    KMP will be merging with c-corp KMI. Heck if I know for certain that I am saving 2014 tax prep time by selling my units before the merger. But I sold anyway. Once burned - twice scared.

    There is some consistency with CPAs on the effort they go through for tax prep on a given transaction -- because they, too, are using tax prep software. So I have some expectation that my 2013 "prep costs" are an event that will be replicated for many CPA using potential purchasers of KMP in 2014.

    If you like KMP (or EPB), buy KMI. At least check with your CPA before you buy KMP. If you buy KMP, don't buy a tiny holding. The tax prep costs would probably be the same if it was 1% or 20% of your portfolio.

    Stocks: KMP, EPB
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Comments (4)
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  • MisterJ
    , contributor
    Comments (1182) | Send Message
    Thanks Mr Factoids. Another aspect of how KMP holders are screwed by the reorg.
    15 Aug 2014, 12:04 PM Reply Like
  • bud4704
    , contributor
    Comments (616) | Send Message
    Taxes on K-1s aren't that hard to do yourself.
    15 Aug 2014, 04:25 PM Reply Like
  • Tin Lizzy
    , contributor
    Comments (122) | Send Message
    Buy KMR instead. At least that would have been good advice last week!
    15 Aug 2014, 04:41 PM Reply Like
  • Factoids
    , contributor
    Comments (1293) | Send Message
    Author’s reply » This info provided on the Investor Village message board - but it does not related to "tax prep" - just the taxes owed that are caused by this upcoming transaction:


    Investors in Kinder Morgan Energy Partners (NYSE:KMP) could owe up to $25/unit in taxes in the wake of its planned acquisition by Kinder Morgan (NYSE:KMI), according to Baird. MLP investors face deferred taxes until they sell their holdings; in this case they're being sold for them if unitholders remain so until the KMI deal closes. KMI has said KMP investors could face a tax bill of $12.39-16.41/unit, but Baird calculated the average tax bill at $19, with it possibly reaching $25/unit for some investors.
    21 Aug 2014, 11:06 AM Reply Like
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