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Kinder Morgan Energy Partners Message Board

  • bulletproofportfolio bulletproofportfolio Jan 30, 2010 5:29 PM Flag

    Holding Period For K-1?

    Anyone know what the minimum holding period for KMP is that will necessitate receiving a K-1 and is it dependent on receicpt of a distribution?

    In other words, if one holds 100 Units of KMP for 1 day, will that unitholder be sent a K-1 reflecting that day's share of net income? What if that day happened to be the day before the units went Ex-Dividend for the Q and thus the holder got the distribution? Is it different is the holding period is one month...two months?


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    • The minimum holding period is a bit confusing (but so are many other things in MLP land). The MLP does not calculate income earned with their current mix of capital investment every day. Some do it once a week, others once a month, I suspect some do it at other intervals. So its not quite a "unitholder be sent a K-1 reflecting that day's share of net income", but its close.

      You will receive a K-1 if you own on the day they calculate income. If you are very unlucky, that could be as short as one day of ownership if you buy the day before they calculate. At the other extreme you could own for one day less than their calculation frequency and not get a K-1, if your timing was perfect.

      All this has nothing to do whether you own on a day-of-record or not. Many new investors who thought they were being clever by buying right after day of record, and selling before the next one, are surprised when a K-1 shows up the following February.

      I suspect if called KMP investor relations they could tell you the income calculation period, and perhaps even the exact schedule. I've never called to find out myself.

      One last wrinkle; say for example the MLP calculates income once a month, and you owned for only one month. The month's income results you will see on your K-1 may look VERY different than 1/12 of the income that a full year investor will get. It all depends on exactly what went on in 'your' month.

      I am strictly a long term investor (of all types if traded stocks, MLPs, etc.), and hence am biased about short term investing. But it always seems to me that MLPs are a particularly bad choice of investments for short term owning; the K-1s are opening up a wild card situation for you. If someone wants to trade there are a whole lot of other investments that have less unknowns than a short term MLP investment.