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Kinder Morgan, Inc. Message Board

  • crocgatr crocgatr Aug 10, 2013 10:57 PM Flag

    Form 1099 vs. K-1 & KMI vs. KMR

    Does KMI issue Form 1099s?
    What is the basic difference between the above 2 issues?
    Thanks in advance.

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    • KMI pays out qualified dividends, same as most other publicly traded companies. KMR distributes new shares in proportion to the KMP cash distribution. You treat these exactly like a stock split--e.g. your number of shares increases every year, but your original cost basis (and date) doesn't change. There is no annual reporting or tax paperwork at all (again, in the same way that any other stock split is not a taxable event). Because KMR accrues book value proportional to the KMP dividend, the new shares aren't dilutive like a traditional split or stock dividend would be. The amount of new shares is based on the KMP dividend divided by the average trading price of KMR over a 10 or 2 day period before the payment date. KMR is also a C-corporation, not a partnership, so you do not get any K-1.

    • For the full story on Kinder Morgan taxes see Arthur Paullin over on Seeking Alpha.

      KMI is a corporation just like Coke or IBM, they have 1099s because the dividend is taxable.

      KMP is a partnership that has K-1s.

      KMR is a holding company that does not have K-1s or 1099s. It gets the same pay out in cash as KMP, but it is retained in the company and new fully paid up shares of KMP are paid to shareholders by KMP. These are tax deferred until you sell. Again check with Arthur Paullin.

    • 3 entities: KMI is C Corp general partner - 1099s (more leverage, growth, lower cur div, corp level tax)
      KMP is limited partnership- K-1s (tax sheltered income vehicle)
      KMR is C corp shell holding KMP units- 1099s(dividends in stock)
      K-1s not that big a deal but partnership also requires:
      1) Unrelated Business Tax in IRA or other tax exempt accounts This is what KMR was designed to avoid.
      2) Have to file a state income tax return for each state the company does business in. This is a nightmare. May avoid in years where have a loss position, but still a tax mess when get to income position. Holding KMR avoids this also.

      Sentiment: Hold

 
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