RE-ASSESS TAX-EFFICIENT SHORT-TERM INVESTMENTS FOR HIGHER RETURNS

As of Aug 2006, investors were presented with the highest short-term interest rates since 2001, as a direct result of 17 consecutive Federal Reserve Board rate increases from Jun 2004 to Jun 2006. This article advises and updates tax professionals on investment opportunities in the area of short-ter...

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Bibliographic Details
Published in:Practical Tax Strategies 2006-11, Vol.77 (5), p.283
Main Authors: Vandenburgh, William M, Harmelink, Philip J
Format: Article
Language:English
Subjects:
Advisors
Alternative minimum tax
Auctions
Bond funds
Federal funding
Federal Reserve monetary policy
Interest rates
Investment policy
Money markets
Municipal bonds
Property taxes
Short term
Tax rates
Tax returns
Taxation
Treasuries
Treasury bills
Volatility
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Summary:As of Aug 2006, investors were presented with the highest short-term interest rates since 2001, as a direct result of 17 consecutive Federal Reserve Board rate increases from Jun 2004 to Jun 2006. This article advises and updates tax professionals on investment opportunities in the area of short-term money products and their inherent tax attributes. The issues examined include alternative money investments, 2006 market volatility, significant increases to T-bill rates since 2004, the Federal Reserve Board's monetary rate increases, and major factors in evaluating a cash investment. Adding to the significance of re-assessing clients' money fund holdings is the volatility seen in the equity markets during the first half of 2006. The ultimate return that investors receive on their cash holdings is the after-tax return. Calculating this necessitates fully incorporating the impact of taxation on the federal, state, and potentially even the local level. For clients with significant cash holdings, having a tax advisor review these investments periodically is clearly worthwhile.
ISSN:1523-6250