this complicates my investment in psx. don't like it. i guess once the spin off is complete i just will get out of the mlp. any thoughts on if psx will remain a good investment after the spinoff?
You make a big mistake when you give a 'thumbs down' to the concept of MLPs, without investigating the big tax advantages that they offer, the higher dividend payouts they offer, and the fact that the pps of the MLP will parrallel it's parent company. MLPs are a truly great investment vehicle.
There are Many Tax Advantages for MLP Investments. Especially for the elderly (google tax advantages for MLPs). Many are not familiar with the tax advantages of mlp's, but they may be the most tax advantageous investment on the market, especially for senior citizen investors.
MLP's generally pay out almost all of their net income in dividends, so they generally pay much higher dividends than stocks. And, for tax purposes, these divvys aren't counted as income, instead they are counted as a 'non-taxable return of capital', a reduction in the cost basis of your investment.
Not meaning to be macabre, but the mlp investment vehicle could mean that elderly investors end up paying no taxes on their dividend payouts, none at all, if they die before their investment cost basis is reduced to zero. The time period it takes for an mlp to reduce the cost basis to zero is between 13 and 15 years. So, if an investor buys the mlp at, let's say, 65 years of age, then chances are that he/she will die before the cost basis is reduced to zero; many years of tax free dividends. But the neat thing is that the heirs will inherit the mlp investment, tax-free, and they can turn around and sell it tax-free.
An elderly investor can make higher dividend yeilds with mlps, than with stocks, and also avoid the 15% tax rate on dividend stocks. For more info on the tax advantages of MLPs, just google 'Tax Advantages of MLPs'
And, the share price of the MLPs generally rises/falls relative to its stock counterpart, in this case PSX.
The dividends for MLPs are reported on K-1 forms, instead of 1099-Div forms, but they are quite easy to report for annul tax returns, using Turbo Tax or H&R Block software.
MLPs WERE NOT designed to be held in tax deferred retirement accounts. With MLPs, you get all the advantages of a tax deferred account, without having to wait until you're 59 1/2 before withdrawing your money.
“We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” said Phillips 66 Chairman and CEO Greg Garland in a statement “We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.” This statement says it all. Their intention is a positive and might just do what is stated in enhancing shareholder value. Or It might not.....there are no guarantees as with any investment . I for one am willing to gamble a bit here by not selling my PSX.
I voted with my feet buy running TOWARD this as an opportunity. I bought an additional 312 shares this morning. What a gift this announcement was...and the value propsition for this stock will only get better. This management is treating shareholders very, very well so far.
There was talk of an MLP possibility when PSX spun off from COP. Most of the pipelines have all fared well under the MLP structure. Investors will line up to buy it, there are distinct tax advantages.
I expect PSX will be the General Partner managing the MLP and unitholders become the Limited Partners. At the spin off PSX shareholders will most likely be offered either cash or shares of the MLP, although not sure how they will present it.
I do not hold MLP's in the partnership because of the K-1 complications at tax time. I do hold KMR & EEQ which are step-sisters of the MLP's KMP & EEP, without the K-1 issues but still offer tax advantages by paying the distributions in additional shares. Most MLP's are dividend machines with tax advantages. Similar to REIT's they do not pay cooperate taxes but pass thru income to unitholders. This is why the mothership PSX wants to separate these assets out.
Let's stay tuned.
I think some people here are jumping to quick conclusions. PSX is not becoming an MLP but selling only their transportation assets to form an MLP. Yes, MLP can be tax nightmares but thats not the case here unless you buy stock in the MLP in which case you then better get your accountant on board. this transaction will raise some nice cash for PSX, etc. Again, all the details have not been ironed out but PSX is not becoming an MLP.
Doug, you post, "I think some people here are jumping to quick conclusions. PSX is not becoming an MLP but selling only their transportation assets to form an MLP."
You are absolutely correct. Most of the posters, concerning the MLPs, seem to believe that PSX is becoming an MLP, and that's not the case. The PSX MLPs will be completely separate from PSX stock. If you want to own the MLPs, then you will have to buy them as a separate entity from PSX.
There is not enough detail on the MLP structure, but, this is normally a positive for shareholders! I will continue to add on any weakness. PSX is certainly focussed on increasing shareholder value while growing the company. Everything this management team has done in the limilted period that PSX has been independent, says accumulate this stock. IMHO