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Kinder Morgan ManAŞement, Ltd. Şti. Message Board

  • xgopt1 xgopt1 Apr 19, 2013 3:42 PM Flag


    I have read a lot of input on this subject on this board. However, since I am planning to invest, I would like to confirm my understanding of the rules. If I buy 1000 shares, at the end of the year I will have added an additional 57 shares based on the KMP distribution pattern? In a standard account, this distribution will be taxed each year at the top tax rate? In an IRA, no tax, and can be sold with no LT gain tax?
    I will appreciate your input very much.

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    • Yes as Clydorn • has said, no forms, no tax until you sell. No K-1s like KMP, or 1099s like KMI, no UBTI like MLPs. With KMR you do not show income until you turn the shares into cash by selling (many years down the line).

    • Well, a couple of things to consider.
      1st: The number of shares received as a stock distribution depends on the stock split ratio computed after the ex-dividend date. This ration is based on the 10 day average kmr price just prior to the ex-div date. This ratio will change based on the price of kmr (more shares at a lower kmr price & less shares at a higher price) and the cash equivalent dividend of kmp. This ratio changes every qtr because the cash equivalent div usually increases each year & the stock price varies. So, using last qtrs split ratio as a guide, for 1,000 shares you would receive the following after 4 qtrs:
      qtr 1: .015656 x 1000 = 15.676 shrs
      qtr 2: .015656 x 1015 = 15.890 shrs
      qtr 3. .015656 x 1030 = 16.125 shrs
      qtr 4. .015676 x 1046 = 16.397 shrs
      Thus your total accumulated stock dividends after 4 qtrs would be approximately 62 shares via the power of compounding. remember this is only an estimate as your qtrly split ratios will differ based on the 10 day average price of KMR.
      You can view these qrtly split ratios at the Kinder Morgan website.

      2nd: Your stock distribution is taxed in a traditional brokerage acct, BUT only if you sell any of those shares. You will be taxed on the capital gain realized based on your holding period. If you don't sell any of your KMR shares you will pay no tax as you have realized no gain/loss until you sell. That is the beauty of holding KMR in a standard brokerage acct, your stock dividends accumulate tax free & you are only taxed when you sell & based on the gain/loss realized. And, of course you can thus time your sales to be most advantagous to youself based on any losses carried forward, expected credits, or current year losses.

      In a Traditional IRA, assuming you do not take early distributions, your distributions will be taxed as normal income in the year you take a distribution & for which you file a tax return. Of course your tax will be based on your effective tax rate.
      Hope that helps; clydorn