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Kinder Morgan Energy Partners, L.P. Message Board

  • yourdeadmeat69 yourdeadmeat69 Nov 19, 2008 6:51 PM Flag

    KMR in a traditional IRA: Help Required

    There's a lot of noise about not holding KMR in a traditional IRA because the year end statement indicates a cash flow that is payable to the holder, and might be taxed even though the holder holds the stock in a 401K.

    Anybody out there having any trouble with this issue, being called on to pay taxes on KMR held in an IRA? It seems pretty obscure, especially since the dividend is in shares, and doesn't represent income till the shares are redeemed.

    I read the rules and my eyeballs crossed. I am thinking of making a substantial investment this company and don't want to get pinged twice by Uncle Shmuck.

    Any help is much appreciated. A solution if this double taxation would be an issue, is to have the distribution of shares transferred to you anyway as a payment outside the IRA. If you're gonna get taxed, you might as well collect the dues.

    Thoughts anyone. Experience please.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • The short answer is - you do not pay any federal income taxes on IRA's or 401K's. They are tax deferred. The only thing that triggers income tax is if you take money out of either during the year. Then you will be taxed at ordinary income. You have already paid social security taxes through your employor for 401K. I've had IRA's and 401k's for over 30 years and you do not pay taxes until you touch them.

    • Why don't you buy KMR instead. It the exact same units of Kinder Morgan but it pays distributions as more units rather than as cash. Each distribution is treated as a fractional stock split rather than as income for tax purposes.
      Kinder Morgan knows people want to hold this in IRA's so they offer this special class of partnership units for that purpose. It does usually sell at a small discount to KMP but that really shouldn't be a problem.

 

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