tax efficiency

1. Percentage of a pre-tax return realizable on a financial instrument (such as a bond, stock or share, unit) by a taxable investor after paying his or her tax liability.

2. Feature of a financial instrument which permits its holder to establish or modify an investment position such that it attracts lower tax liability than other such instruments. Tax efficient instruments include tax-free bonds, tax-free money market accounts, and stocks (shares) which are held for more than a year (thus paying long-term, and not short-term, capital gains tax).