17th Nov 2009 by Joseph Pousada
Commercial paper is debit issued with a maturity less than nine months by various institutions and agencies. Many corporate institutions will issue commercial paper and issue the shares through broker / dealers or sell them directly to money managers at money market mutual fund companies. Governmental agencies will also sell commercial paper in the form of RANs (Revenue Anticipatory Notes) and TANs (Tax Anticipatory Notes). In the United States there was a Supreme Court ruling that disallowed different levels of government from taxing each other. As a result municipal securities are exempt from federal income tax in the US and some municipalities have made their bonds exempt from state and local income tax as well to attract investors. Before investing directly in commercial paper it is important to review the specific investment with your financial advisor. In addition, it is especially important to review the investment with your tax advisor for those pursuing tax exempt strategies.
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