Because KMP does not pay corporate taxes (federal and state), and KMR units are created on a 1:1 ratio to KMP, taxes on the KMP units held by KMR will eventually have to be paid. Question is what impact will that have on KMR prices? Thanks. I hope some of us who have invested a fair size of our investment understand.
KMP does not pay income taxes as any income taxes are passed on & payable by the partners. The KMP shareholders, the partners, are assigned proportional amounts of taxable items, income & expenses, via the K-1 they receive.
KMR is taxed as a C-Corp & would pay taxes on it's income except for the partnership agreement by which no income is credited to the KMP shares it owns. The distributions it receives from KMP are merely distributed to KMR shareholders which I think are really a "Return of Capital" on KMR's part & thus no tax liability.
The only tax problem would arise in the event KMP were to liquidate at which time KMR would receive cash for its' shares of KMP. But, like any investment we make, we are making a bet that the company we buy does not liquidate, unless of course you are shorting a stock.
So, unless technology really throws us a curve ball, & we find that fossil fuels are no longer needed, I think we are safe. But, we must never forget what happened to the best buggy whip manufacturer, Smith Corona, Polaroid, Xerox, Blackberry, Nokia & the list goes on.
Good hunting: clydorn