Kinder Morgan deal risks unpleasant tax surprise for some investors

|About: Kinder Morgan, Inc. (KMI)|By:, SA News Editor

The Kinder Morgan companies open lower, giving back a bit of yesterday's big gains following the plan to consolidate their collection of pipeline companies: KMI -1%, KMP -1.4%, KMR -1.1%, EPB -1%.

Some investors in Kinder’s MLPs could be left with big, unexpected tax bills; taxes on the substantial quarterly payouts from MLPs are deferred, and when the units are sold or exchanged - as they will be in the reorganization - the deferred taxes come due.

Some investors were planning on holding the units and not paying a tax until they sold it or died, "so it's probably going to be a bit of a surprise for those people,” says Twenty-First Securities' Robert Gordon.

Kinder Morgan confirms the deal will be a taxable transaction for owners of KMP and EPB, while KMR owners will have a tax-free transaction; according to estimates released by the company, the tax owed by an average investor in KMP units could range from $12.39 to $18.16 per unit, depending on the individual’s tax rate.