Final answer:
A Mortgage-Backed Security (MBS) is the instrument that allows cash flows from a block of commercial mortgages to pass through to security holders tax-free at the intermediary level.
Step-by-step explanation:
The tax device that allows cash flows from an underlying block of commercial mortgages to be passed through to security holders without income taxes at the level of the trustee or agent is a Mortgage-Backed Security (MBS). Mortgage-Backed Securities are financial instruments that are secured by a pool of mortgage loans. They allow investors to benefit from the mortgage payments and principal repayments from this pool of mortgages without being taxed at the intermediary level, as the tax obligations are passed on to the investors who receive the cash flows.