"The tax won't be that huge."
"how many times do we have to beat this issue to death"
Beaten to death, but nothing really settled. What kind of a hit are IRA investors dealing with here? Some kind of concrete example is needed.
Please tell me if this is correct or approximately correct.
Let's say someone held a large number of KMP units in an IRA for the full year 2013 and then sold. In 2013 KMP recorded $1446M in "Depreciation, depletion and amortization" on their income statement. Weighted average units outstanding were 416M. Therefore, depreciation etc. per unit was $3.48. The four distributions in calendar year 2013 totaled $5.26 (not exactly the same as the $5.33 FOR 2013 since the latter includes a payment made in Feb 2014).
3.48/5.26 = 0.66. So this hypothetical large investor will pay 39.6% on 66%, which is about 26%, of his received distributions in UBTI tax. This is the top rate. Smaller investors (those with recaptured depreciation not large compared to $11950) will pay at a commensurately lower rate.
I checked other years and the depreciation to distribution ratio was in the same 66% ballpark.
So IRA high rollers will give up about one-quarter of everything they've received in the past. Is this about right or is there more to it?
It makes no difference. Its a sale either way. An actual sale if you sell thru a broke, or a deemed sale if you hold on and have your KMP shares converted to KMI shares and cash.
And because you will be selling your entire investment in this MLP, you will most likely exceed the $1,000 threshold for unrelated business taxable income (UBTI) and your IRA will owe a tax. You must raise funds within your IRA to pay the tax, so sell some KMI stock, or some other securities in your IRA.
So, there's nothing you can do about it now. There never was anything you could have done. Your KMP invest will be gone and that's the trigger. UBTI results from depreciation recapture on the MLP physical assets that are deemed to be sold. Watch for the blizzard of discussion of this on this message board in early 2015. You'll have time to get up to speed. The tax won't be that huge. The KMP investment has been a winner for almost all investors.
I highly doubt that. That would be a 2.5% yield.
$50 maybe as that would be a 4% yield. To get there the analysts will really have to believe that the 10% dividend growth through the end of the decade really has merit. It will also have to be believed by them that the dividend growth will remain strong after that. 7% would still be pretty strong IMO.
For KMI to reach $60 by the end of 2015, KMI would have to really be exceeding by a lot of what they predict for the year. You never know, some big deals could be in the works and Rich Kinder has had a history of exceeding expectations.
If I had to guess, I'd say the stock will hit $50 some time in 2015 but I wouldn't say it would finish the year there. Probably somewhere in the mid 40s.
once KMI traded above $37 the all stock transaction is the best choice, and the higher KMI goes, the more advantageous it becomes. You are multiplying KMI by a stand alone constant (2.4849) , versus multiplying by a constant and a fixed amount (2.1931 + 10.77).
Right...kmi will be at 42 to 45 in no time....this is great for all that held all of there shares......as my numbers tell me that will be the largest gain........and what is this guy thinking that he can buy kmp again...no it is now kmi ......but do yourself a favor and go buy all the kmi you can as it will be up in the 80's in 2015 with a 2.00 div. great stock what a way to end the year......
Sentiment: Strong Buy
Perhaps the old saying, "sell on news, buy on rumor." - it might be people selling for tax reasons now that KMP will no longer be a MLP - actually I sold in my regular account just for that reason - I didn't want an accounting nightmare - hold all in IRA now, but will buy more in regular account next year - it will be taxed at the "qualified" dividend rate of 15%.
Well, I see that the KMP to KMI discount dropped and half to about 1% after the merger approval announcement. The KMR to KMI discount just about disappeared.
The reason we have IRSs and 401Ks is to NOT PAY TAXES on gains. A MLP is different because as a partner we are given K-1s around April of each year and the tax consequences are "slightly" different. The bottom line on a K-1 (all figured by corporate kmp tax people on the company/ well beyond anything we can figure) CAN be taxable if it exceeds a certain amount. IT ALMOST ALWAYS WON'T EXCEED THAT AMOUNT. I own MANY mlps and have NEVER paid taxes- The negative K-1s always offset the positive K-1s- NO TAXES in 7 years. Buy, sell, convert, etc, etc, in an IRA is "almost always" a no tax event; you DO pay taxes when you take the money out for spending/income.