Kinder Morgan consolidation

[Running_Man]

After some thought today of holding on for the exchange, I decided to sell my shares today @ 95, was quite a pleasant surprise last night when the news came out. Seems to be fully valued at this point to me, although the prospects to me seem bright for the new company and it is extremely well run. Anybody have other thoughts? Is going to bring a lot of individual taxes to the owners to give tax advantages to the mother corp, but then I like being able to pay taxes!

 

[jimnjana]

I think I will be adding to my shares of KMI after the hoopla dies down. Hard not to invest with Mr Kinder. KMI will become 3rd largest energy company in US. Growth and yield at a reasonable price.

 

[MRG]

I thought about selling some, but decided the reason I bought it was still valid. Congrats on taking a profit.

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[clifp]

Does anybody understand the tax consequences of the consolidation.. I own both KMP, bought long ago at $44/share. I thought it would be a non taxable event but this note from the the M* Dividend investor newsletter guys has me confused.

"The tax aspects of Kinder's consolidation plan are bad for longtime holders of KMP and EPB too. The exchanges of KMP and EPB for KMI shares and cash will be treated as sales, which in turn will force any capital gains to be taxed whether the investor continues to hold KMI shares or not. Worse, because of the arcane rules of partnership taxation, whatever taxes on cash distributions KMP and EPB unitholders have been able to defer up until now will become taxable when the exchange takes place--and not at the preferential long-term capital gains rate, but the ordinary income rate. (If you own KMP or EPB, please consult a tax professional for more information.) Yet structuring the deal this way directly benefits KMI: It will receive giant corporate tax deductions for years to come. '

 

[MRG]

No. I've seen some info on how the units will converted 1 KMP = 2.19 (?) KMI. Same source claimed a ~$10.00 payout per unit of KMP. No details of how or when this happens(4Q 14?). So I've got no guess on taxes. If it's a 2014 event, I'll get to learn how my MAGI estimate impacts ACA subsidys. I guess that's not a bad problem to have.

 

[Running_Man]

It is going to be a taxable event this is not a like kind exchange because you are not getting an MLP in return. I think you are going to owe taxes on the difference between 44 and conversion value as ordinary income. That is why they are giving 10 a share to help pay taxes, they knew this would create taxable events.


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[HpRyder]

No. I've seen some info on how the units will converted 1 KMP = 2.19 (?) KMI. Same source claimed a ~$10.00 payout per unit of KMP. No details of how or when this happens(4Q 14?). So I've got no guess on taxes. If it's a 2014 event, I'll get to learn how my MAGI estimate impacts ACA subsidys. I guess that's not a bad problem to have.

According to my MLP Newsletter, KMP shares are sold so all taxes will be due as if it were an normal sale, but you'll get KMI shares at a new cost bases:
1 KMP share = 2.1931 KMI shares + $10.77

KMR get a like kind exchange so there is not sale tax due:
1 KMR share = 2.4848 KMI shares

All will be completed by end of 2014.

 

[DTCS]

The Kinder Morgan website has a calculator under the K1 investor info if you have signed up in the past. It has all of your transactions which will help you come tax time. If you have held for a long time you will pay income tax rates on your adjusted gain and tax on your long term gain due to share price appreciation. I'm paying extra on my upcoming estimated taxes to account for this. I wish they kept it an MLP but I understand his reasoning.


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