As we’ve seen in the last few months, the market is vulnerable to headline risk, which could cause the major averages to really swoon if Congress can’t put a deal together to avoid the fiscal cliff.

I’ve been busy trying to find a few cliff-proof assets that still serve investors’ long-term income needs, avoid a big tax bite and maintain stable principal — without the help of David Copperfield.

The impasse in Washington to resolve the pending fiscal cliff has certainly raised the level of volatility in the market. Though we’re not in total panic mode, with the VIX is at a relatively tame 17 today, we’ve recently seen major moves in stocks like Pandora (NYSE:P, -17% today), Netflix (NASDAQ:NFLX, +15% Tuesday) and Gap (NYSE:GPS, -13% Tuesday).

However, contrary to what many had predicted, the major averages are holding above key support levels on the belief that there will be a grand bargain before Dec. 31. Who knows what will happen, but according to Credit Suisse (NYSE:CS), it is becoming clear that modifying the tax treatment of master limited partnerships is not part of any grand bargain.

My two picks in this space are America First Tax Exempt Investors LP (NASDAQ:ATAX), an MLP that invests in tax-free multi-family development bonds, and Memorial Production Partners LP (NASDAQ:MEMP), another MLP that deals in oil and gas production and is showing excellent growth prospects for 2013.

America First Tax Exempt Investors LP

As the name suggests, ATAX is a tax-free MLP that invests in multi-family municipal revenue bonds that use a bit of leverage (about 26%) to pay out a current yield of 7.5%. This asset is about as well-positioned as can be, given the current healthy growth rates for apartment occupancy and rising rents, as well as the Fed’s commitment to holding interest rates down for the next two years. Also, the current low cost to borrow funds allows MLPs like ATAX to leverage up their yield.

The company invests in tax-exempt mortgage revenue bonds and related investments, taking advantage of attractive financing structures available for MLPs. I spoke with management at ATAX earlier this week and was very impressed at how they have positioned their capital, both from a geographical standpoint as well as from a leverage standpoint, where their rate of borrowing is capped at around 4%.

I also like the fact that a director stepped up and purchased 30,950 shares on Nov. 26 at $6.46 per share. I would expect the fourth quarter of 2012 to also reflect it being the highest revenue period, as it was in 2011.

As a bonus, the shares trade ex-dividend around Dec. 26, less than one month away. What a nice Christmas gift!

Memorial Production Partners LP

MEMP is a newer name that just raised its payout, putting it near an 11% yield. This MLP is a Delaware limited partnership that owns and acquires oil and natural gas properties. Currently, it has mature, legacy oil and natural gas reservoirs in Texas and Louisiana, and will soon close on a property in California.

Acquisitions are a big growth driver for MEMP. The company acquired five properties in its first year of operation, and just last month signed an agreement to acquire and gas properties in offshore Southern California from Rise Energy Partners LP. This field has a production reserve life of about 25 years, about 14% of MEMP’s total reserves, and is immediately accretive to distributable cash flow.

Being a secular bull on natural gas, I’m also attracted to the fact that MEMP’s production of proven reserves stands at 533 billion cubic feet, composed of 1,611 gross (692 net) producing wells from more than 50 fields and 25 different geologic horizons, 79% of which is natural gas before the most recent acquisition. That number will come down a bit, but the emphasis on the gas side of the equation is attractive.

Both stocks are showing bullishness as investors flee to tax-free high-yielding investments, and I expect more of the same once the details of investment taxation become clearer.

Bryan Perry is editor of Cash Machine, a newsletter focused on dividends and income investing.