Income Taxes
Merrill Lynch's 2000 income tax provision was $1.7 billion, representing a 30.4% effective tax rate compared with 31.4% in 1999, and 34.2% in 1998. The decline in both the 2000 and 1999 effective tax rates was primarily attributable to an increase in lower-taxed non-U.S. income and additional tax-advantaged financing. Deferred tax assets and liabilities are recorded for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. Merrill Lynch assessed its ability to realize deferred tax assets primarily based on a strong earnings history and the absence of negative evidence as discussed in Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. During the last 10 years, average pre-tax earnings were $2.6 billion. Accordingly, management believes that it is more likely than not that deferred tax assets, net of the related valuation allowance, will be realized (see Note 12 to the Consolidated Financial Statements).

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