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Kinder Morgan Energy Partners Message Board

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  • sukitaudry6 sukitaudry6 Nov 29, 2012 11:03 AM Flag

    Only a dunce would buy KMP here.....

    I am a KMR shareholder, forgot to qualify that in my post above.

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    • I don't pay until I sell the units.
      I don't intend to sell.
      Will pass it on to my heirs.

      Sentiment: Strong Buy

      • 1 Reply to rjraecek
      • First of all, no one is a dunce reading this thread. it is just a comparison of KMR v. KMP.

        So you mean KMP holders pay no tax on distributions?
        KMP is an MLP and the MLP doesn't pay income taxes but passes them thru to the limited partners (unit holders), even if most is considered Return Of Investment,some tax must come due????
        OK, if little or no tax is due on distributions of KMP, then the cost basis reduces proportionately, eventually going to zero while the # of units remains constant. Also, eventually the IRS will want its tribute (share of taxes).
        If one never sells KMP their cost basis reduces to zero or close to. The units will have a value whatever that may be with a low basis, leaving a high Capitol Gain (unrealized). Am I right so far?
        If the owner dies and passes on the stock to his/her heirs, they inherit KMP with a high value and low or nil basis, that is with a huge cap gain tax to pay. There is no stepped up basis because the basis has been reduced all along.
        I'm no accountant but I can't see the IRS just forgiving the taxes due. The taxes are simply deferred and at death deferrment is over, unless in a Roth IRA and then it gets complicated.
        If this scenario is correct or nearly so, then I see no advantage over owning KMR.
        Someone please prove me wrong.