I woke last Monday to great news! However after thinking about it, I feel like I have been shafted. I bought KMP for the dividend. I am getting $27,800 from KMP but will get $21,300 from KMI. KMI will send me a check for $53,850, but I will pay 39% in taxes or about $21,001.50.The taxes are an entire year in dividends. Obama will use this money to breed more welfare sloughs. I feel screwed twice. Here is a message for Richard Kinder, I want a stock for stock swap. I am willing to forego your cash offer unless you give me the right to take KMI stock at a discount instead of cash. I do not need cash. I need dividends. Go figure the deal again because lots of people like me are not happy with your first offer.
If you are saying your effective tax rate is 39%, the taxes you owe will not be based on the amount of cash you receive, but rather the combination of capital gains taxes and depreciation recapture at ordinary rates on the whole enchilada. I think you are going to end up paying taxes at $10 to $20 per share of KMP that you own depending on how long you have owned the shares (and how much tax was deferred during your ownership of the shares). Personally, I think the deal for KMP shareholders should be sweetened a bit, but since the taxes owed on the KMP shares was just deferred and going to have to be paid eventually anyway, the deal is still probably good for KMP if growth was going to be hampered by the MLP structure.
Some irony here in that waccamabill's Plantation mentality finds him complaining about profits he made from the Plantation pipeline. Moreover, he looks for sympathy for making gobs of $ and having to pay taxes.
Maybe he should, get a better accountant, get a better investment, get a better outlook, get a better life.
JMHO - Richard Kinder
I don't get it. You make $$ off the stock and are complaining about paying taxes on the profit?? Think of it this way, if you didn't have to pay any taxes, you wouldn't be making anything off the stock.
So your initial dividend next year falls from $27,800 to $21,300(though it will increase by 10% per year after that. ) That's a decrease of $6,500. But you get a check for $53,850 and pay taxes of $21,000. That means you have $32,850 left over in cash. That is more than five times your decreased dividend. Most people in that situation would be shouting for joy, not whining about it. And look art the cap gain you are racking up. The KMP stock you hold now, should you wish to sell it, has moved from 80 to almost 99. And you still complain?
From NY Times (DealBook) 8/14/14
"The company also could have structured the roll-up transaction as a nontaxable transaction to unit holders, but chose not to. Had it done so, it would not have garnered the tax benefit of a step-up in basis.
Larry Pierce, a spokesman for Kinder Morgan, said in an email that it would be incorrect to focus only on potential taxes, while ignoring the “future value proposition” flowing to unit holders from the conversion to shares of KMI, which he characterized as a faster growing security. On average, he said, unit holders “will be substantially better off on both a pre-tax and an after-tax basis” compared with the status quo.
Ms. Dang also emphasized that the company believed the transaction would on average make unit holders better off on both a pre-tax and after-tax basis."
Personally, I plan to sell my entire position if KMP goes to $103. I will have more at the Capital Gains rate and less at the ordinary by foregoing the 10.77 per unit. While longs have done very well over the years, the sudden impact of finding ways to pay the huge tax all at once is quite a challenge. Selling outright is a better option imho if the price is right.
"The company also could have structured the roll-up transaction as a nontaxable transaction to unit holders, but chose not to."
I don't see how thats possible since your converting from a limited partner\mlp to a c corp. The udo tax burden is strictly based on deferred taxes on ordinary income, which is unavoidable with the ending of the mlp.