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Energy Transfer Partners, L.P. Message Board

  • dar200 dar200 Jan 29, 2013 9:28 AM Flag

    ETP vs KMP experiment

    I sold long term positions in ETP and KMP last year to trigger the suspended passive losses. I had different lots of both purchased at different times, dripped ETP for the 5% discount and took cash distributions from KMP. Consequently, it was a difficult job to calculate and compare total returns between the two.

    So, On Jan 7 this year, I invested equal dollar amounts in KMP and ETP. The purchases were made within 3 minutes of each other (the first triggered limit order made me go to market to get an immediate purchase on the second position. I set both at Fidelity to drip distributions. I have no intention of changing either position other than dripping distributions. Consequently, I can easily calculate total return with precision except when KMP is ex and ETP is not.

    KMP trades ex today, so my first comparison is yesterday's close. As of the close yesterday. KMP is up 5.05% from my purchase on Jan 7 and ETP is up 3.18%. ETP was ahead until they announced the ATM program causing a two-day selloff.

    After the first drip is posted for both, I will report total return here.

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    • Richard Kinder told you what he has budgeted for distributions and what he would end year up distributing.for KMP/ ETP has given the same distribution for 4 3/4 years. I hope you understand it is price plus distribution that is what you follow not price alone.

    • "I sold long term positions in ETP and KMP last year to trigger the suspended passive losses. "
      Yikes, that's an expensive thing to do (assuming in a taxable account). If it's really a long term position (meaning your cost basis was close to zero), then depending on your tax bracket and whether you live in a high tax state like CA then you could owe close to 50% of your proceeds in taxes.

      Then you turn around and purchase again, so you are paying all those taxes for no reason. One of the biggest advantages of MLPs is the tax deferral and you just throw it away.

      • 1 Reply to lizahuang54321
      • I traded mostly a long gain for ordinary losses. The section 751 income (ordinary) was peanuts relative to the ordinary losses triggered by a total disposition., Plus long = more than one year. I still had significant unrecovered basis. Plus I had capital loss carryforwards which were worth only a 3,000 offset to ordinary income. I got much more ordinary loss by selling all and sheltered some of the long gain with loss carryforwards, which will now be exhausted.

        I calculated this forward and backward several times before I did it. The move saved me a ton when I needed it. Now I have a new basis to defer taxes on distributions until basis is reduced to zero. Yeah I paid a couple of bucks more to buy it back than I sold both for, but the tax savings will be multiple timess that cost.

        Of course, I had to guess at the 2012 K-1s, but I could not wait to know precise numbers and still have a 2012 total disposition.

    • interesting, however for a drip investment I would have bought KMR instead of KMP, and I would have put ETP on the company sponsored drip (as opposed to the fidelity dripper) which gives a 5% discount on the drip shares.

      • 1 Reply to purplespyderman
      • Fidelity has participated in the discount drip plan since its inception, without being asked by me.

        I have run a poll every quarter to expose brokers who do not participate and which participate only when asked by the client. I will do so again this quarter. From recollection, one has to "talk to Chuck" at Schwab to get the discount but the squeaky wheel does get the grease. Etrade and Vanguard do not participate as of the last drip. One poster wrote that a Vanguard rep told him no discount drip existed for ETP.

 
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