Short-Term Tax-Advantaged Investment Vehicles
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Examine Your Tax Picture to Reduce Tax Cost

As you’re working with your Merrill Lynch Financial Advisor to create your business’s investment profile, one of the issues to consider is your company’s corporate structure and effective tax rate. By considering the after-tax yield on your short-term cash, you may determine that a tax-exempt strategy is ideal for your business.

  • Generate tax-free or tax-advantaged income on your short-term idle cash
  • Make a difference in your bottom line by considering after-tax returns on invested funds
  • Balance your portfolio with the option of investing in both taxable and tax-advantaged securities

Compare Short-Term Tax-Advantaged Investment Vehicles

Investment Vehicle Income/ Tax Status Credit Quality Maturities/ Liquidity Denominations
Dividends-Received
Deduction-Eligible
Variable-Rate Preferred 		Rates track money market instruments. 70% of dividends may be deducted from taxable income. Varying degrees of credit quality. Generally no fixed maturity date. Liquidity subject to current market conditions and varies depending on credit quality and supply/demand factors. Generally issued in multiples of $100,000.
Tax-Exempt Money Market Funds Dividends exempt from federal taxes. High credit quality. Excellent record for preservation of capital. No set maturity. Highly liquid. Generally unit denominations of $1. Institutional funds may have minimum investments of $25,000 or more.
Tax-Exempt Variable-Rate Preferreds Rates track money market instruments. Exempt from federal and state taxes. High credit quality. Generally no fixed maturity date but usually a mandatory redemption feature. Liquidity varies depending on credit quality and supply/demand factor. $25,000 to $100,000 depending on the type and issuer.
Variable-Rate Demand Obligations Rates track money market instruments. Exempt from federal and state taxes. Generally backed by various forms of enhancements such as letters or lines of credit, insurance and/or company guarantees. Nominal long-term maturity. Highly liquid through remarketing agent. Generally issued in multiples of $100,000.

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Merrill Lynch, Pierce, Fenner & Smith Incorporated is a registered broker-dealer, not a bank, and the WCMA account is not a bank account. Banking services are provided by licensed banks or by third parties through arrangements with licensed banks. Unless otherwise indicated, investment products are not FDIC-insured, not guaranteed by a bank and may lose value.

Merrill Lynch does not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S., federal, state or local tax penalties. Please consult your tax advisor as to any tax, accounting or legal statements made herein.

Neither Merrill Lynch nor its Financial Advisors offers tax advice. Please consult a tax professional to determine the impact of your choices on your tax obligations.