Reorganization could be costly for long-time Kinder Morgan Partners' owners


For owners of Kinder Morgan Partners (NYSE:KMP) worried about the coming tax bill as their units become absorbed into Kinder Morgan (NYSE:KMI), the harsh reality is that the longer they have benefited from reaping years of KMP's excellent returns, the worse they'll fare when tax time rolls around.

Ethan Bellamy, an MLP analyst with Robert W. Baird, estimates investors who acquired units during 1992-2000 could owe $24.04-$25.22 per unit, investors who acquired units during 2001-10 could owe $10.78-$23.72, and investors who got their units during 2011-13 could owe from $4.62-$7.13.

What's more, there's very little unitholders can do about it; while "death is the best tax planning for MLPs," the coming reorganization counts as a taxable sale, with KMP investors slated to receive $10.77 in cash and 2.1931 shares of the new firm for each unit they currently hold.

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Comments (144)
  • bernzzz
    , contributor
    Comments (42) | Send Message
     
    These shareholders have had the long-term benefit of excellent returns and DEFERRED taxes (until their basis reached zero). Their KMP investments were never supposed to be tax free unless the investors passed along their shares to their heirs when they died. This, by the way, is still an option that they still can take advantage of before the exchange takes place if escaping the tax man is of such paramount importance.
    Given how great an investment this has been, the long-term KMP investors are crying not in their beer, but in their champagne. All one's investments should be so bad.
    30 Aug 2014, 08:47 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    How can one take advantage of passing on units to heirs escape the tax man? You'd still have to pay a gift tax, then they would have to pay taxes again if they sold it.
    30 Aug 2014, 09:05 AM Reply Like
  • hhmcdon
    , contributor
    Comments (323) | Send Message
     
    Bernzzz: Very well said! I would like to add this quote from John Sculley
    "The future belongs to those who see possibilities before they become obvious."
    30 Aug 2014, 09:45 AM Reply Like
  • Ruffdog
    , contributor
    Comments (3265) | Send Message
     
    1992-2000 could owe $24.04-$25.22,-$10.77 per unit=$13.27-14.45- investors who acquired units during 2001-10 could owe $10.78-$23.72,-$10.77=... investors who got their units during 2011-13 could owe from $4.62
    -7.13,-$6.15-10.77=$-1...

     

    Rich keep the champagne flowing!
    30 Aug 2014, 10:57 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    I don't know of anyone who would take their "DEFERRED" taxes all in one year. That is like ignoring the minimum distribution of your IRA or other qualified plan and cashing it in all at once. We will pay a lot more in taxes on all our income this way. I don't believe that anyone would have bought this investment had they thought this was a probablility.
    30 Aug 2014, 11:03 AM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    gift tax??? Are you talking about your bezillionaire clients?
    30 Aug 2014, 11:26 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Last I heard, if you gift over $14,000, you have to pay a gift tax.
    30 Aug 2014, 11:28 AM Reply Like
  • NC Investor
    , contributor
    Comments (699) | Send Message
     
    rip

     

    The requirement is to die before the deal closes then your beneficiaries can use the Stepped Up Basis to avoid paying taxes.

     

    I decided to avoid this option. (bg)
    30 Aug 2014, 11:36 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    I LOVE the answer.
    30 Aug 2014, 11:43 AM Reply Like
  • cstauffer
    , contributor
    Comments (542) | Send Message
     
    rlp2451, I am not an accountant or tax expert, however there is really no such thing as a gift tax that is owed. The "gift tax" is when you file an IRS form for gifts to one person exceeding the annual amount that the IRS allows you to give any single person. I believe that this amount is around $13,000. Any amounts over that per person need to be reported when you file your taxes and that amount will reduce your individual $5 million Federal Estate Tax Exclusion.
    30 Aug 2014, 12:04 PM Reply Like
  • cstauffer
    , contributor
    Comments (542) | Send Message
     
    See my reply above. Gift tax is one of the most commonly misunderstood financial concepts that I know of.
    30 Aug 2014, 12:06 PM Reply Like
  • TexasRedNeck
    , contributor
    Comments (172) | Send Message
     
    If you hold them till you die,,they would be inherited at a stepped up cost basis avoiding the tax man. This is just Mr. Kinder enriching himself and his friends (majority owners of kmi) at a cost to his long time supporters. You might consider how much this hurts long time owners of KMP before you buy kmi.
    30 Aug 2014, 12:40 PM Reply Like
  • David Allen 1
    , contributor
    Comments (31) | Send Message
     
    When you DIE, your securities are passed to your heirs sans taxes. THEN they start all over, with a cost basis based on the price of te secrity when their benefactor died.
    30 Aug 2014, 01:10 PM Reply Like
  • woppenhe
    , contributor
    Comments (231) | Send Message
     
    In Canada, they abolished the tax breaks; there is always risk, and there is always going to be taxes. Don't let tax policy run your portfolio decision making; KMP is getting bought out at a premium which, along with the returns over time, will ameliorate some of these 'unexpected' taxes. Agree fully with the crying in your champaign comment.
    30 Aug 2014, 01:50 PM Reply Like
  • caperdory
    , contributor
    Comments (475) | Send Message
     
    If you die....they can step up the basis
    30 Aug 2014, 01:52 PM Reply Like
  • Doctorft
    , contributor
    Comments (96) | Send Message
     
    What a foolish post by bernzz. According to your profile you have worked in the financial industry for over 40 yrs. I assume it is the IRS. If you are an INVESTOR and make a plan for retirement and your estate and get blind sided by your holdings and or the government you may have a little more empathy. Suppose one of your major holdings told you you were going to have to send
    $200,000 to the government, but we are going to send you $85,000 but you have to come up with the other $115,000. Oh by the way we are going to reduce what we pay you by 20% and you will have to pay taxes on what we pay you every year too. But that is okay because after 4 yrs. we will be paying you the same as we pay you now, only if you do not consider the taxes you have to pay in the meantime. Kind of hard to make a plan when these things hit you in the face.

     

    Sure has been a great investment for me but I will not invest more in Kinder because the company has lost my trust. I probably will not liquidate my position, unless I need the cash to pay the IRS.
    30 Aug 2014, 03:03 PM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    Rip, As I have said, sometimes experts, investment bankers, and those who work for large CPA firms just don't get it when it comes to the rest of us who are not in the top brackets. Just like Richard Kinder said that the 'average' KMP holder was in the 35% bracket ($405K for MFJ). Certainly a married couple could gift double that amount. Or gift $14,000 to multiple heirs. Or perhaps, and I know you will not believe it, but there may be some poor souls whose holdings may even be LESS than $14,000.
    30 Aug 2014, 03:23 PM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    NC,
    Please let us know if you change your mind.
    30 Aug 2014, 03:30 PM Reply Like
  • Sarah Phelps
    , contributor
    Comments (7) | Send Message
     
    Per person. And you don't pay it, it is levied against your $1,000,000 total allowance when you die.
    30 Aug 2014, 04:59 PM Reply Like
  • Faa Faa
    , contributor
    Comments (24) | Send Message
     
    a good scam by kinder to push off debts to owners
    30 Aug 2014, 05:03 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (4322) | Send Message
     
    Mr. Bellamy's figures are not correct. I've owned KMP since 2000, and the "projected gain/loss calculator" on the k1support.com website shows us a tax bill of about $42/unit. In our case this is reduced to about $33 a unit only because we started paying long term cap gains taxes on our cash distributions after our tax basis hit zero as you are supposed to do. This is a devastating situation and we will be obliged to increase our quarterly estimated tax payments FIVE FOLD.
    30 Aug 2014, 07:20 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    Doctor FT,

     

    What if Exxon offered to buy KMP for $100 per unit, and had the votes to close the deal. Wouldn't you be in exactly the same tax situation?

     

    The reason you have the tax liability is because someone bought an MLP, and didn't realize what the tax benefits were and what those benefits cost when paid for.

     

    Richard Kinder didn't do this to you, you did.

     

    If Bershire bought your units, you would also have the same tax liability and no income.

     

    Take you now unencumbered cash and money from the units you can sell, now tax free and invest in something that has a higher yield and tax benefits as KMP. If it is an MLP, beware Chevron or someone else might buy it and make you pay up again.

     

    I own, KMP, KMR and KMI, and will be happily paying tax on KMP.
    2 Sep 2014, 07:51 AM Reply Like
  • Doctorft
    , contributor
    Comments (96) | Send Message
     
    I totally understand the consequence of investing in MLP's. That is exactly why I Invest in them and never trade them. I have owned KMP, EPD, PAA, ETP, KMR, and many other for over 25 yrs. I will handle the tax liability but that does not mean I have to like it.

     

    I do believe if Berkshire,or Exxon were to buy KMP it would be at a much higher premium than what KMI is paying. As a KMI holder I would pleased with that additional premium. Yes, I realize a higher premium means more taxes.

     

    I do see this as a long term negative for the MLP sector now that the tax advantage of investing in this sector is at risk by a buyout by any C-corp including your own GP.

     

    I have owned several MLP's taken out by other MLP's for unit swaps which had no tax consequence. I owned the GP of EPD the limited limited partner took out the GP.

     

    Bottom line I do believe I understand the situation and who did what to whom.
    2 Sep 2014, 08:36 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Yes you do understand completely. I am getting an appraiser and donating all the valuable stuff I don't want or need anymore for max tax deductions. This is a very good year to do it!!
    3 Sep 2014, 11:10 PM Reply Like
  • User 353732
    , contributor
    Comments (5152) | Send Message
     
    Investors who have capital loss carry forwards will be able to shield themselves.
    30 Aug 2014, 09:01 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    I am not sure, but it seems a good portion of the tax will be ordinary income. Please, someone, tell me I am wrong!!
    30 Aug 2014, 10:45 AM Reply Like
  • JWAYMOO
    , contributor
    Comments (102) | Send Message
     
    Sorry, but you are not wrong :( I used the Kinder Morgan tax basis calculator on their website and learned that my cost basis was negative at the end of 2013 and about half of my gain would be ordinary income. I sold my entire KMP position at $98. My original cost in 2008-2009 was about $52 per unit. The gain on each unit will be about $110. It will substantially increase my 2014 taxable income, pushing me into a higher tax bracket, and causing other negative tax impacts.
    30 Aug 2014, 02:57 PM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    JWAY,
    The tax calculator does not take into account any passive losses that you may carry over from prior years.
    30 Aug 2014, 03:28 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    How can you have a gain that exceeds the price you sold the stock at? How can you have a negative cost basis especially if you bought in 2008-9?
    30 Aug 2014, 09:07 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Shocking, isn't it? But entirely possible, even probable:

     

    http://seekingalpha.co...
    30 Aug 2014, 09:39 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    The other issue I have trouble understanding is the reduction of basis exceeding the distribution by a lot.
    30 Aug 2014, 10:55 PM Reply Like
  • Arthur Paullin
    , contributor
    Comments (501) | Send Message
     
    Rip: You can not have a gain greater than your sales price. Your capital account can be negative but your tax basis is never less than zero. I see nothing in the cited article to contradict that.
    31 Aug 2014, 02:13 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    The authors' second example illustrated how it can happen. It can occur once the distributions exceed your cost basis in an IRA. Those deferrals add up and are recaptured (that's what UBTI is). Someone who bought KMP very early on - say for $10 in 1997 - and never sold, would have passed their zero-cost basis very quickly. All the depreciation (and other deductions) since then will now be recaptured and the taxes will be much greater that the $10 per unit they originally paid.
    31 Aug 2014, 07:15 AM Reply Like
  • JWAYMOO
    , contributor
    Comments (102) | Send Message
     
    tomuchgas - Here are the details:
    This is the actual per share data from KMP tax basis calculator for my account:
    Price at 12:30PM on 8/18/2014: $97.66
    Average purchase price per share Oct 08 – Jun 09: $51.79
    KMP calculator adjustments to tax basis as of 12/31/2013: $-53.70
    Tax basis cost as of 12/31/2013: $-1.91
    Total gain/loss as of 12/31/2013: $+99.57
    2014 distributions as of 8/18/2014: $4.13
    Approximate gain per share for 2014 federal taxes: $103 +/-
    -- This play by Richard Kinder on a position that was only 5.66% of my portfolio value more than doubles my 2014 AGI and places me in the highest tax bracket. I will be meeting soon with my CPA to try to find a way to mitigate the damage done. I suggest that other unit holders carefully evaluate their own circumstances.
    31 Aug 2014, 09:07 AM Reply Like
  • FleetUSA3226
    , contributor
    Comments (872) | Send Message
     
    You need to get all the K-1s and do the full recalc. Based on what Morningstar and the WSJ said you are missing something. I don't trust "on line" calculators.
    31 Aug 2014, 09:59 AM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    Ug!
    31 Aug 2014, 11:03 AM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    If I might interject here. But my basis minus sale at $98 plus income Is equal to two thirds of my projected gain. So yes it is very possible that you will pay tax on more then you have received, pushing you into a much higher tax bracket. We are paying the taxes for the company since this is an limited partnership. I do not mind paying on what I have earned but it blows chunks paying on something you never got. Also for those who have held for a long time your basis will be zero or negative and any passive losses will have long been used up. Mr. Kinder is sticking it to those who were his most loyal investors.
    31 Aug 2014, 07:51 PM Reply Like
  • Arthur Paullin
    , contributor
    Comments (501) | Send Message
     
    Darnoc: "But my basis minus sale at $98 plus income Is equal to two thirds of my projected gain." That reminds me of word problems received in school except I have no idea what you mean but in any case your conclusion is wrong.

     

    The least your basis can be is zero. It cannot be minus since any distributions received that would lower it below zero are taxed as capital gains when the distribution is received and thus do not affect your basis.

     

    "I do not mind paying on what I have earned but it blows chunks paying on something you never got." What is it that you never got? If you are saying it is earnings,then you are forgetting that part of all those distributions to you that were more than the income received each year were for paying the taxes some day.

     

    Therefore, if you sold it for $98, that is your maximum gain for FIT purposes.
    31 Aug 2014, 10:07 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Arthur: From the IRS.gov website on dispostion of Partnership Interest:

     

    Negative Capital Accounts (Cost Basis Less Than Zero)
    If a partner’s capital account is negative at the beginning of the year and has a balance of zero at the end of the year, the partner may have left the partnership without satisfying his/her share of partnership liabilities. If so, the departing partner may have received a deemed cash distribution under IRC section 752(b) or there may have been a disguised sale of a partnership interest. If this is suspected, the following techniques may help in the development of the issue and lead to additional lines of inquiry:
    Scrutinize changes in the amount of debt appearing on the balance sheet (Schedule L).
    Review item J of Schedule K-1, “Analysis of partner’s capital account”.
    Compare Schedules K-1 for several years focusing particularly on Item F, “Partner’s share of liabilities.”

     

    If the partner’s capital account was reduced to zero, check for amounts on any of the distribution lines on the Schedule K-1.No distribution may be an indication that there was a sale, while a distribution may be a sign of a liquidating distribution.

     

    If there has been a sale, exchange, or distribution, consider the ordinary income component(s) (IRC section 751). If the partnership is on the cash method, determine if it has contracted for services to be performed in the future or for goods to be delivered at a later date. The value of these contracts may have been imputed to the selling price of the partner’s interest in recognition of the value of an unrealized receivable.

     

    The presence of cost recovery assets on the balance sheet should raise questions as to whether there is a potential for ordinary income recapture. Depreciation recaptured under IRC section 1245 or IRC section 1250 is probably the most common example of recapture treated as an unrealized receivable under IRC section 751(c). Other items of ordinary income recapture should be considered in evaluating the presence of unrealized receivables. Some examples include:
    Amortization recapture on a disposition of an intangible asset. IRC section 197(f)(7).
    Recapture resulting from a reduction in basis elected by a partner under the qualified real property indebtedness rules. IRC section 108(c).
    Soil and water conservation expenditures recapture. IRC section 1252.
    Ordinary gain recognized on the transfer of a franchise, trademark, or trade name. IRC section 1253.
    Recapture of depletion, intangible drilling and development costs, and mining exploration costs. IRC sections 617 and 1254.
    Accumulated earnings and profits recapture of certain controlled foreign corporations. IRC section 1248.
    Ordinary income realized on a sale of market discount bonds or short-term obligations. IRC sections 1278 and 1283.
    Recapture of rental income accrued but deferred. IRC section 467.

     

    The general rule is that any ordinary gain or loss that would be recognized by the partnership upon disposition of its property should be considered when determining the ordinary income component inherent in a sale of the partnership interest.
    31 Aug 2014, 10:40 PM Reply Like
  • Arthur Paullin
    , contributor
    Comments (501) | Send Message
     
    rip: What is it you are trying to prove? If it is that your KMP capital account (or COST basis) can be less than zero, there is no dispute--it is less than zero for practically everybody. If you are saying that your TAX basis can be less than zero, your quote is not applicable. Why you provided that whole quote is a mystery--it appears to be a manual for IRS agents in determining if there has been a sale of a partnership interest and if so, determining what part of the gain should be ordinary income.
    1 Sep 2014, 01:36 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    When KMI buys KMP, those who own KMP will be considered selling part of their partnership interest to KMI. You keep saying your basis can't go below zero - I am just showing how it can, and how some may wind up paying more than they ever invested in the units.

     

    I doubt if "most" KMP owners now have zero basis (or less than zero) - if they bought since 2010 they most likely still have a positive capital account.
    1 Sep 2014, 07:45 AM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    Basically I am going to pay tax on about a third more gain/ income than I received, total income. Sorry you seem to not understand but this is the way it is. I know what my basis is and how much I have earned and it is only two thirds of what the estimator shows as income. Also if your basis is showing a negative balance, mine is not but my dads is and it seems as if they add this back as income. Even if this is wrong, for only me I know that I am paying tax on a third more than I have gained / earned and I probably will vote down this takeover. I have always wondered why Kinder was purchasing so much KMI and not KMP so now we know.
    1 Sep 2014, 07:43 PM Reply Like
  • surfgeezer
    , contributor
    Comments (9908) | Send Message
     
    Actually he liked KMR, no wonder- it totally escapes taxation......
    So first as a EPB holder, I get screwed by EP CEO Douglas L. Foshee selling out all the expected dropdowns my due diligence expected, so he can walk away with tens of millions and have them given to KMP. Stupidly I reason oh well, buy some KMP also.....
    Yeah I trust these CEO's. Diversify folks
    2 Sep 2014, 12:33 AM Reply Like
  • FleetUSA3226
    , contributor
    Comments (872) | Send Message
     
    @darnoc. You need a good CPA and ALL your K-1s. It isn't as bad probably.
    2 Sep 2014, 06:28 AM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    I have held limited partnerships since the late 80's and have done the taxes myself. And believe it or not it is as bad as I and others say. I really do not understand how others think this is all made up? If anything those who think they will owe very little (if they have owned for a long time) will have a big surprise next year when they not only have to pay the tax but also the penalties from not paying in enough.
    2 Sep 2014, 08:36 AM Reply Like
  • Arthur Paullin
    , contributor
    Comments (501) | Send Message
     
    rip: I think I finally understand why we are in such disagreement. I assume you are mainly relying on the article you linked to. The problem is it was written pre-reorganization and the examples he cites are based on partial sales of his position. As he points out, the basis of partnership units is determined on a total position basis so that every unit has the same basis. For instance if you bought 100 units in 2007 and then 1 unit yesterday for $65 and sold it today for $66, you won't have a $1 gain That 1 unit is included in the total of 101 units and all the distributions, etc. that have happened to the 100 are now allocated to 101. He might have a $10 tax gain, not just $1. Tax basis not being less than zero has to do with the entire holding, not for any particular unit or units.

     

    However, when the 100 units does get sold and he adds up how much he sold the 101 units for, his tax profit will not be greater than his proceeds. It could be less if the tax basis hasn't gone to zero, but not more.

     

    And Recapture does not change that; all Recapture does is recapture part or all of the tax profit as Ordinary Income instead of Capital Gain.
    4 Sep 2014, 12:20 AM Reply Like
  • acgreene
    , contributor
    Comments (260) | Send Message
     
    I believe passive losses, as noted on the K-1 can be used to limit tax liability, and one's actual tax bracket is important as well. Even so, it's been a good ride for most, and 10.77 per unit helps as well.
    30 Aug 2014, 09:07 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Have you actually added this up? If you want to have the same amount of assets earning interest you would have to use almost all of the $10 per share to buy extra KMI shares.
    30 Aug 2014, 10:46 AM Reply Like
  • Siwanoy
    , contributor
    Comments (716) | Send Message
     
    I also wonder whether the transaction will be a long term depressant to KMI?
    30 Aug 2014, 09:14 AM Reply Like
  • booroy2
    , contributor
    Comments (219) | Send Message
     
    I've said this before in here, that if your KMP shares are in an IRA, my CPA (Long standing of 30 years) tells me not to worry. We have never worried about the K-1 forms and shouldn't have to worry about the consolidation of KMP into KMI.
    There seems to be some disagreement with this especially in some of the SA blogs, but I'd rather trust my guy than some Turbo Tax on line forms.
    30 Aug 2014, 09:17 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    You're right, but make sure you know that he's responsible for any penalties and interest should he be incorrect.
    30 Aug 2014, 09:33 AM Reply Like
  • stuyoung
    , contributor
    Comments (259) | Send Message
     
    I too thought that way, until I sold KMP in my IRA 3 years ago. The IRS came after me and my tax preparer. I had the opportunity to pay back taxes, penalties and interest. My guess is that this will be low hanging fruit for the IRS. I have since stayed away from MLP's in my IRA, as has been suggested on SA hundreds of times.
    30 Aug 2014, 10:44 AM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
     
    The only immediate tax inside of an IRA would be tax on any UBTI created by the Partnership or the dissolution of the Partnership
    30 Aug 2014, 10:52 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    The word is IF it is in an IRA. Many people , including me, did not put KMP shares in an IRA because there was something about anything over $1000 in distributions would be taxed.
    30 Aug 2014, 11:06 AM Reply Like
  • Chancer
    , contributor
    Comments (4050) | Send Message
     
    I have stayed away from MLP's period. Many on SA tell me that I am missing out on great returns.

     

    The high yield portion of my portfolio yields me 14.33%. The total of all my dividend stocks yields me 11.14%. All my dividends divided by my total stock portfolio (dividend and non dividend) yields me 5.32%.

     

    I am comfortable with staying out of MLPs and avoiding the complications- such as what KMP investors are complaining about right now. Thank you very much.
    30 Aug 2014, 11:19 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    OK, so hindsight is 20/20 vision.
    30 Aug 2014, 11:44 AM Reply Like
  • NC Investor
    , contributor
    Comments (699) | Send Message
     
    Despite the Kinder buy out negatively impacting KMP holders I still view MLPs as a great investment if you chose the right one and buy at the right price.

     

    The major benefits provided by the government being the ability to defer taxes on the distributions as well as the combination of the MLP and you avoiding the double taxation seen by most stocks on dividends. In today's era of low interest rates MLPs provide an opportunity not available in many other investments, namely the combination of high yields and tax deferral.

     

    For those looking for long term investments I think it smart to avoid MLPs with IDRs, such as what caused the KMP situation. Some MLPs without IDRs include MMP, EPD, GEL MWE and others. In short older very successful MLPs with IDRs tend to see the IDR fee of up to 50% resulting in them becoming non competitive, such as happened to KMP.
    30 Aug 2014, 11:48 AM Reply Like
  • paul1942
    , contributor
    Comments (51) | Send Message
     
    What high yield items yield you 14 percent?
    30 Aug 2014, 12:18 PM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    I know I may sound ignorant, but what is UBTI?
    30 Aug 2014, 01:45 PM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Interesting!!
    30 Aug 2014, 01:46 PM Reply Like
  • R.Fitz
    , contributor
    Comments (931) | Send Message
     
    LKF
    Think it means Unrelated Business Taxable Income -- certainly not an ignorant question tho.
    30 Aug 2014, 07:25 PM Reply Like
  • schek711
    , contributor
    Comments (12) | Send Message
     
    Besides the cash and the new KMI shares you get a 2% div which is slated to rise 10%/yr plus the increase in KMI share value which is predicted to grow as well.

     

    Sorry I don't get the hand wringing over having to pay taxes you would pay anyway when you sold your shares. True if you were hoping to pass on your shares at death you would avoid the taxes but now sadly you have to pay ...but then your heirs benefit from the increased values you get from the KMI stock...sorry I cannot cry
    30 Aug 2014, 09:18 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    You don't get the handwringing? How would you like to pay $40-$50,000 up front in one year, have your tax bracket increased so that your ordinary income is at a higher bracket and your Medicare costs rise. The majority of people plan so that their income stays within a reasonable range.
    30 Aug 2014, 11:10 AM Reply Like
  • JWAYMOO
    , contributor
    Comments (102) | Send Message
     
    LKF - You have clearly stated my concern. I have always managed my buys and sells to balance out year over year and not cause a radical change in my AGI and taxes. The taxable merger prevents me from doing intelligent income management. Also, KMP was intended to be part of my estate with the cost basis reset when inherited.
    31 Aug 2014, 10:16 AM Reply Like
  • smurf
    , contributor
    Comments (6047) | Send Message
     
    This is why I bought KMI in the first place. No future tax headaches like the ones the KMP and EPB owners are facing now. But, they need to quit whining...they've enjoyed the tax bennies for a while..now time to feed Uncle.
    30 Aug 2014, 09:19 AM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
     
    Of course there would be future tax headaches when you finally sell. Not everyone is giving their units to heirs.
    30 Aug 2014, 10:54 AM Reply Like
  • mydogmoe
    , contributor
    Comments (1321) | Send Message
     
    Very simple. Make money pay taxes. Lose or make none pay none. "Render to Caesar what is Caesar's". Now you know why you should have put these big distribution payers in your IRA...
    30 Aug 2014, 09:56 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    We all expect to pay taxes- just not all at once!
    30 Aug 2014, 10:43 AM Reply Like
  • Chancer
    , contributor
    Comments (4050) | Send Message
     
    The deal might not close until 2015. If that happens, you could still split over 2 years by selling 1/2 of KMP in 2014.
    30 Aug 2014, 11:22 AM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    If the authors estimate of taxes is correct. I bought in the 2011-2013 timeframe. Lets say at worst I owe the $7 per unit. (but I am in the lower tax brackets) The price was $80 the day before the announcement--now $96. I am not complaining.
    30 Aug 2014, 09:57 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    The smarter you were the worse you will do.
    30 Aug 2014, 11:12 AM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    If you believe price will be higher by closing date, and you plan to hold onto your KMI shares. You could perhaps reduce your tax bite by selling now and buying KMR. Like KMP its selling below the conversion price so better than buying KMI now. You will get about the same number of KMI shares whether you sell now or wait until end. But if KMP were to go to $110 or so your cap gains will be higher.
    30 Aug 2014, 10:03 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    How crazy is this " If you believe the shares will be higher?" Timing the market is NEVER wise.
    30 Aug 2014, 10:48 AM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    David Stein - I would agree with your point of selling KMP and buying KMR. But if the deal falls through then KMR will drop back to below KMP and not only will you be paying taxes on a gain and income but you will be facing large losses on KMR. As I see it you may be better to buy KMI when it drops below where it is now. And then sell KMP at a higher price when KMI goes back up to a more equivalent takeover price for KMP. Or you could buy into another MLP or some other investment, the question is where and how much do you lose? And you are right the higher KMP goes the more you will owe and since the amount is fixed you get no more KMI than what you can get today.
    30 Aug 2014, 03:16 PM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    LKf,
    by using the word 'if', I was holding that plan open to those who believe the price will be higher. That is not market timing.
    30 Aug 2014, 03:35 PM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    darnoc,
    Yes that plan was based on the fact that the deal would go thru. And would be a disaster if it would not. Although I think that it is a slim chance the deal will not go thru on time.
    30 Aug 2014, 04:57 PM Reply Like
  • rick mule
    , contributor
    Comments (46) | Send Message
     
    Was wondering have both KMP and KMI and hold in a self directed IRA. That will do nothing for taxes for now but in the future, will I have to pay a larger part because of the mlp break up?
    30 Aug 2014, 10:12 AM Reply Like
  • stuyoung
    , contributor
    Comments (259) | Send Message
     
    Read my reply to another poster....above.
    30 Aug 2014, 10:45 AM Reply Like
  • davidwisdom39@yahoo.com
    , contributor
    Comments (56) | Send Message
     
    This article is stupid, is comical! If an investor has been accumulating huge profits over time, at some point in time he or she will have to pay taxes on it! Did anyone actually believe that these regular dividends were a tax-free gift?
    30 Aug 2014, 10:12 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Yes, if you kept it until you died, it was!
    30 Aug 2014, 10:42 AM Reply Like
  • David Stein
    , contributor
    Comments (1606) | Send Message
     
    LKf,
    Now that's what I call market timing. Basing your investments on your death!!LOL
    30 Aug 2014, 03:36 PM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    FUNNY!!
    1 Sep 2014, 12:04 PM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    It was purchased as an income stream, not as an investment.
    2 Sep 2014, 04:21 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    What you should have bought was an annuity or a long term tax free bond. An MLP is not only an income stream. Maybe an investment advisor sold you the wrong investment. It is an equity claim on the partnership's cash flow.
    If someone comes to the decision that they want to buy your equity position, and receives sufficient support of the partnership, and a price is accepted, they can buy the partnership's equity and end your income stream.
    While I don't wish it, your heirs could still receive the stepped up cost basis at your demise, but I would prefer that they don't.
    2 Sep 2014, 06:43 PM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    I understand what it is AND I represent annuity companies. I have several which I do not intend to annuitize. I was using this particular investment as an income stream and it was great. It also had the ability to appreciate so it is different and possiblly better than an annuity with a greater yield IF you are willing to take the risk. However I did not imagine the risk to be selling all in one year. This was a risk that no one anticiipated. Most people thought they had control over when they would sell it, if ever.
    3 Sep 2014, 11:19 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    Lkf,
    I am in the same boat as you in owning KMP for a long time. I realized long ago the tax liability I was incurring. I valued the cash flow's tax status while working and I was in a higher bracket, after retiring it was not of much advantage to me. So I started accumulating KMI and KMR.

     

    In recent years I have considered selling the KMP since the growth opportunities for the company were declining due to the fact that the limited partners' cost of capital had grown so high. I didn't because the tax hit would be so high.

     

    Management's solution to the cost of capital problem was unforeseen for me, and solved my problem of how and when to free up my capital. Going forward without this transaction would have made KMP a worse investment each year for me. It would have continued the decline in potential growth and over time led to declining prices, greater dilution, and eventually lower distributions.

     

    Other than the planned transaction, I don't see any good solution for my trapped capital. Passing the asset to my heirs upon my demise, would be the best financial result but the worst for me, since I'm having too much fun living, and plan to do so for the next forty or fifty years.
    4 Sep 2014, 07:00 AM Reply Like
  • jimsbirds
    , contributor
    Comments (5) | Send Message
     
    This article states the obvious. The more money you have made with KMP the more taxes you will have to pay! Boo Hoo!
    30 Aug 2014, 10:51 AM Reply Like
  • ronjam
    , contributor
    Comments (4) | Send Message
     
    I've owned KMP for 10 years,
    and although I never planned to sell it, I'm NOT whining. It's been a great ride, and I look forward to enjoying the dividends and growth in the future.
    30 Aug 2014, 10:53 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Let's see what happens when the tax bill comes through!
    30 Aug 2014, 11:13 AM Reply Like
  • LoisK
    , contributor
    Comments (27) | Send Message
     
    It is not that we have to pay tax on the shares, it is as if we distributed our qualified plan all in one year! Most of us plan to have the minimum distributions so that our tax bracket isn't affected. The tax bite will be worse than any of us expected and far worse than it would have been had we paid taxes every year on the distribution.
    30 Aug 2014, 10:53 AM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
     
    You are correct. It will be a huge hit for anyone with big numbers of units. People with hundreds of thousands or millions of dollars in revenue from this deal will pay some big taxes. I only ever purchased KMR since I've been in the highest tax bracket for the past 10 years, so there are no tax consequences to me on this deal.
    30 Aug 2014, 11:08 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    Very good! Being in the highest tax bracket why did you choose KMR instead of KMP? It did work out for you, but what was your thinking?
    30 Aug 2014, 11:26 AM Reply Like
  • paul1942
    , contributor
    Comments (51) | Send Message
     
    Lkfeinberg, I too chose KMR over KMP based solely on the comments I read on this site. There some very smart investors who offer good advise through their comments. I really miss Sumflow.
    30 Aug 2014, 12:40 PM Reply Like
  • JWAYMOO
    , contributor
    Comments (102) | Send Message
     
    Exactly!
    31 Aug 2014, 10:22 AM Reply Like
  • cwagn111
    , contributor
    Comments (142) | Send Message
     
    So die already, and be happy in knowing you beat the IRS.
    30 Aug 2014, 11:00 AM Reply Like
  • Ruffdog
    , contributor
    Comments (3265) | Send Message
     
    Hedgeye and Barrons I cannot hear you!
    30 Aug 2014, 11:01 AM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
     
    This story isn't news. We knew all this right after the announcement.
    30 Aug 2014, 11:04 AM Reply Like
  • Bazzasday
    , contributor
    Comments (18) | Send Message
     
    I invested in KMR the beginning of 2014at around $72, can any body tell me how this consolidation will effect me and tax implications.
    much appreciated,
    Baz
    30 Aug 2014, 11:13 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Your KMR will be exchanged for KMI shares, but keep your basis of $72. No tax due until you sell.
    30 Aug 2014, 11:18 AM Reply Like
  • Lkfeinberg
    , contributor
    Comments (37) | Send Message
     
    It will not effect you at all. You will not have to pay taxes on the consolidation. From what I am reading, you will be in the best position of all!
    30 Aug 2014, 11:24 AM Reply Like
  • durango58
    , contributor
    Comments (275) | Send Message
     
    Bazz, Rip is correct. You will receive 2.4849 shares of KMI for each share of KMR you own in a tax-free exchange. Your cost basis remains the same.
    30 Aug 2014, 12:31 PM Reply Like
  • Bazzasday
    , contributor
    Comments (18) | Send Message
     
    Thanks rip & others for your responses.

     

    So the only difference after the consolidation for me is that ongoing dividends will be taxable where as KMR dividends are free of tax.
    I realize being in KMR is possibly better than KMP & KMI due to tax situation on consolidation, but going forward i will be taxed on dividends where as i was not previously.
    with this in mind are KMR investors at a longer term disadvantage ?
    30 Aug 2014, 03:53 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    It would be beneficial to look at the KM presentation (especially slides 11, 12 and 13) as to the long-term projections for KMI and when the advantages of KMI vs KMP/KMR/EPB are to surpass the status quo of each:

     

    http://bit.ly/1r7hzhZ
    30 Aug 2014, 04:07 PM Reply Like
  • Bazzasday
    , contributor
    Comments (18) | Send Message
     
    thanks for the link RIP, very informative
    31 Aug 2014, 06:44 AM Reply Like
  • clamosaurus
    , contributor
    Comments (133) | Send Message
     
    I think it's "rlp" not "RIP". No need to memorialize him yet :-)
    1 Sep 2014, 07:27 AM Reply Like
  • adenzeno
    , contributor
    Comments (9) | Send Message
     
    I have KMP in a Roth. I am presuming that I will have no tax issues with the KMI exchange as the Roth profits are tax free. Can anyone tell me if this is so?

     

    Thank you in advance,
    30 Aug 2014, 02:33 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Roth IRAs are not exempt from UBTI, so the IRA may be just as liable for the taxes as described in the post.
    30 Aug 2014, 02:43 PM Reply Like
  • adenzeno
    , contributor
    Comments (9) | Send Message
     
    I thought Roths were tax exempt/free unless withdrawn too soon.
    30 Aug 2014, 03:21 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    http://1.usa.gov/Qigwqj

     

    Page 2:

     

    In addition, the following are subject to the tax on unrelated business income.
    - Individual retirement arrangements (IRAs),including traditional IRAs, Roth IRAs, Coverdell IRAs, simplified employee pensions (SEP-IRAs), plans for employees (SIMPLE IRAs).
    30 Aug 2014, 03:32 PM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    Finally someone has put the numbers down so all can see. Since I am being forced out of my investment I am trying to find alternatives to KMI, any ideas? My tax liability is somewhere in the $20+ area right in line with the analyst. If I have learned anything from this, it is to be more cautious on buying MLP's since these are not an investment you can hold forever. If I had paid taxes on my earnings each year instead of all at once I would have paid less in tax. Also since the way the deal is structured as KMI goes higher so does KMP and EPB which increases your taxes but gives you no more shares or income. Too bad Rich Kinder did not just use KMP to takeover the other companies. Though I guess those who own KMI and KMR then would be crying.
    30 Aug 2014, 02:57 PM Reply Like
  • surfgeezer
    , contributor
    Comments (9908) | Send Message
     
    And that would be him.
    2 Sep 2014, 12:59 AM Reply Like
  • FleetUSA3226
    , contributor
    Comments (872) | Send Message
     
    @darnoc. As KMI goes higher your net assets increase since you are getting 2+ shares for each share of KMP.
    2 Sep 2014, 06:31 AM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    FleetUSA3226 -You mean your net asset value? But so do my taxes since as KMP goes higher so will my gains. In other words a wash. My goal is to limit my taxes not increase them. As the old saying goes it is not how much you make but how much you keep.
    3 Sep 2014, 12:09 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    darnoc111,

     

    From the analysis I have read, the cost of KMP taking over all the other share and unit classes would have been highly asset destroying for KMP unit holders, and the price they would have to pay for IDRs immense.

     

    If you think that owners of KMP in taxable accounts are unhappy now, I can't imagine what they would be doing if they had to buy KMI, the limited partners would have to lever up their balance sheet multiples of times or dilute their interests with a hugely dilutive equity issuance.

     

    They wouldn't get KMI's IDRs cheaply!
    3 Sep 2014, 01:09 PM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    You may be right, but this tax thing sure is kicking my butt. I am now having to stop doing any investing because of the tax liability that I have, in order to save enough to pay for the taxes that I will now be hit with. Too bad Kinder did not have KMP take over KMI when EPD did theirs'. Poor planning.
    3 Sep 2014, 10:20 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    darnoc,

     

    I don't follow you. You say your tax liability on KMP is about $20 per unit. If you sell your units now you will get $95 per unit, if you wait for the close of the buy out you will receive $10.77 cash and more than 2 shares of KMI per unit. You can sell some units and easily cover the tax.

     

    That shouldn't affect any other investing at all. What am I missing here? How does the tax liability affect your other investing. All you have to do is decide if you want the KMI shares or to cash out and make another investment.
    4 Sep 2014, 07:18 AM Reply Like
  • Dallas!
    , contributor
    Comments (3) | Send Message
     
    How about donating some of your appreciated units to a charity? You avoid the taxes and help your fellow man. Each unit holder can look at their 2013 K-! to see what their cost basis is going into this year. If you have held KMP for 10 - 15 years you may have a negative K-! basis and will pay ordinary income taxes on the past sheltered distributions and capital gains taxes on the rest from that K-1 basis. Time to ask you CPA about your individual situation. The gifting idea will work for small estates less than $5million as you can use your gift exemption over $13,000 toward your lifetime gift exclusion which counts toward your $5 million estate exclusion. Just some thought from a former financial advisor for 35 years.
    30 Aug 2014, 05:00 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    MLPs and charities:

     

    http://onforb.es/HTVCbn
    From Forbes:
    Don’t donate depleted MLPs to charity. Since they are pregnant with ordinary income, your deduction would be limited to the stock market appreciation in the shares. (Buy at $50, let the basis run down to $0, donate when the share is worth $52: Your charitable deduction is $2).

     

    And this, from a recent (January, 2013) Barclay's presentation:

     

    Treatment upon charitable donation
    Question: “Is an MLP an ideal asset for charitable donation?”
    Answer: Probably not.

     

    Donating an MLP to a charity may not be the ideal strategic approach for a taxpayer to take. Although the tax code permits a client to make a charitable contribution of MLP assets, the actual amount of the charitable deduction will be reduced by the amount of depreciation deductions that would have been subject to recapture (and subject to tax at ordinary income rates) upon donation.

     

    However, in most cases, the fact pattern that arises is that taxpayers will own MLPs for many years and consider donating them only after their basis has declined substantially and is at, or near, zero. At that point, the value of any charitable donation will generally be substantially reduced due to the impact of the above rule.

     

    Tip: Charitable entities that receive MLPs as a result of a donation should also carefully assess whether or not they wish to divest themselves of the asset or continue holding it and risk exposure to the potential tax consequences associated with UBTI. If a charity reports UBTI, they can potentially lose their tax-free status.
    30 Aug 2014, 05:08 PM Reply Like
  • rrosey2
    , contributor
    Comments (883) | Send Message
     
    I'm seldom at a loss for words, but frankly this KMP development (merger/takeover) has me baffled. At first I greeted it as brilliant. Then, this tax treatment confuses me. Probably, I will do nothing, and hold my heavy positions in family trust and retirement, pension accounts, which I have had for at least 17 years.It always struck me that KMP was too good to believe. I suppose Richard Kinder saw that too.
    30 Aug 2014, 06:19 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (4322) | Send Message
     
    If you're a long term holder, visit the "projected gain loss calculator" at the K1support.com website. The link is not easy to find. You go to where you can retrieve your K1 form and scroll down to the very bottom of the page an look for a link on the left hand side. Be prepared for a shock. Then visit a very good CPA who is knowledgeable about MLPs (not all of them are) and see if there are any mitigating factors in your situation. Bring your tax returns and your K1s for at least the past 3 years.
    We've owned KMP for 14 years and the gain/loss calculator showed us a tax bill of about $42/ unit. The CPA says this should be reduced to about $33/unit in our case because we started paying long term cap gains taxes on our cash distributions after our basis hit zero. Still it is a huge hit and we are obliged to increase our quarterly estimated tax payment FIVEFOLD. I went on to the IRS website and enrolled in their electronic payment program so I won't have to hire an armored car to come to our condo to pick up the check for the IRS.
    30 Aug 2014, 07:25 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    You don't have to pay up until Apr. 15, 2015 provided you pay quarterly based on 100% of your 2013 income.
    31 Aug 2014, 06:36 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    I hope none of the other MLPs get the bright idea to convert to a C corp.
    30 Aug 2014, 09:22 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    KM will be on the prowl for MLPs next year. Possible targets: MWE, MMP, WES, PAA/PAGP.

     

    ETE/ETP will likely convert by 2016.
    30 Aug 2014, 09:45 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    Great that means RGP will convert too.
    31 Aug 2014, 11:06 AM Reply Like
  • gabby1945
    , contributor
    Comments (2304) | Send Message
     
    Rip,

     

    I believe MMP is too big for KMI to consume. They may buy some assets, but not the whole company. A more likely target would be WPZ.
    As far as takeovers, ETE, EPD, or KMI may takeout NGLS.
    IMHO.
    31 Aug 2014, 11:28 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    They'll need something MMP's size to move the needle. Once the KM merger is complete, it will have an enterprise value around $140B. MMP is only around $22B and has very little debt, easily enabling a buyout.

     

    WMB would never sell WPZ separately, and I don't think they could buy Williams without running into antitrust problems.

     

    IMHO.
    31 Aug 2014, 12:01 PM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    At some point there's got to be some antitrust concerns, too.
    31 Aug 2014, 06:37 PM Reply Like
  • darnoc111
    , contributor
    Comments (1548) | Send Message
     
    If they go after other MLP's then will those owners be subjected to the taxes like KMP and EPB are? And if they are wouldn't their shareholders vote against any takeover unless the takeover premium is enough to pay all the taxes? This will make it even more expensive for KMI to acquire any MLP possible limiting their growth? Just a thought!!
    31 Aug 2014, 08:04 PM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Yes, yes and no.
    31 Aug 2014, 08:19 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    toomuchgas

     

    You should also be concerned that some other entity would buy one of your MLPs. The tax consequence would be the same if Exxon bought your units. You should be aware of the potential tax consequences you signed up for in buying and holding the units.
    2 Sep 2014, 08:10 AM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    darnoc111,

     

    The tax liability would only be of significance to long term holders in taxable accounts. Pension plan owners and IRA owners and owners with no or little IRS liability would likely be very happy to vote their units for a buy out at a lower price than those with large tax liabilities.

     

    The unit holder's tax liability doesn't really dictate the value at which the shares will take place in the market. All you really need is for 50% +1 unitholders to be happy with the deal. That is sometimes called "The Tyranny of the Democracy"
    2 Sep 2014, 08:19 AM Reply Like
  • rlp2451
    , contributor
    Comments (9385) | Send Message
     
    Taxable and tax advantaged accounts. Just for the record.
    2 Sep 2014, 08:35 AM Reply Like
  • 15946412
    , contributor
    Comments (37) | Send Message
     
    Uncle Pie

     

    I have read many of your comments and you have mentioned "Go to website K1support.com several times. I have tried until I am blue in the face and cannot get on this site. Either google or yahoo keeps sending me to hundreds of others but the one I want.
    please advise
    jamas
    31 Aug 2014, 01:00 AM Reply Like
  • Ready2Retire
    , contributor
    Comments (17) | Send Message
     
    taxpackagesupport.com
    31 Aug 2014, 09:43 AM Reply Like
  • JWAYMOO
    , contributor
    Comments (102) | Send Message
     
    Sign in by going to http://bit.ly/HMDorz and clicking on the link in the list for Kinder Morgan Partnership. You must be a unit holder and register. This is also where you can also download K-1 tax packages.
    31 Aug 2014, 11:05 AM Reply Like
  • flintoid
    , contributor
    Comments (10) | Send Message
     
    15946412,

     

    K1 support for KMP is found on kindermorgan.com. Drill down into the Investor section. Then choose KMP. Then choose K-1 Information. You will need to register to access your holding information. Once into account, then choose Access Tax Package. Then choose Projected Gain/Loss Calculator (along left edge). You will need to input selling price and number of units. This will break out Ordinary Income and Capital Gains. Info is based EOY 2013.
    31 Aug 2014, 09:50 AM Reply Like
  • R.Fitz
    , contributor
    Comments (931) | Send Message
     
    April 15th, 2015 sure will be an interesting date. Only 100 in taxable 2K in IRA's/Roth's
    31 Aug 2014, 11:16 AM Reply Like
  • Maryellen41
    , contributor
    Comments (16) | Send Message
     
    I am missing a few K 1 forms. 2 from 2011 and 1 for 2010. Have tried to contact KM investor relations without any luck...now what???
    31 Aug 2014, 10:48 PM Reply Like
  • FleetUSA3226
    , contributor
    Comments (872) | Send Message
     
    As an aside, I wonder what the arbs are doing with this transaction?
    1 Sep 2014, 08:27 AM Reply Like
  • Ruffdog
    , contributor
    Comments (3265) | Send Message
     
    why all this grumbling? As general partners we have no say.
    1 Sep 2014, 09:37 AM Reply Like
  • toomuchgas
    , contributor
    Comments (991) | Send Message
     
    One thing all this shows is that the distributions aren't that great a deal. They are just taking your money and giving it back to you and reducing your basis. The better use of cash would be to plow it back into the company. MLPs that have kept their distributions lower like EPD and PAA have done better than the ones paying out more. This is the whole idea behind what KMI is doing. You don't have to be a C corp. to do it as EPD proves. SE which is a C corp. has been my best pipeline company over time.
    1 Sep 2014, 04:41 PM Reply Like
  • FleetUSA3226
    , contributor
    Comments (872) | Send Message
     
    @toomuchgas. Yes, that's why it is called "return of capital". Just like in an annuity.
    2 Sep 2014, 06:32 AM Reply Like
  • waltmcg
    , contributor
    Comments (8) | Send Message
     
    I purchased KMP in March of this year at ave. cost of $78+ per share.
    Since this transaction as I understand it will be considered a sale,
    would I not incur a short term tax liability on any value of KMP above
    my cost basis. I also assume the cash payment for each share has
    tax consequences.
    4 Sep 2014, 01:33 PM Reply Like
  • KMR holder
    , contributor
    Comments (729) | Send Message
     
    You will pay tax at ordinary income rates on your short term gain which would be about $16 per unit, the $10.77 cash would be considered part of your gain. You would also have some tax liability on your May, August and November distributions determined based on the K-1 you receive next year.
    If you sell the units now, you will not receive the November distribution and any tax liability on the distribution would be avoided.
    4 Sep 2014, 07:11 PM Reply Like
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