Added Tax Savings from Giving $10K in Appreciated Securities Estimated at $449

BOSTON, October 31, 2007 - A new report issued today by Fidelity Investments^® revealed that 10 to 20 million households in the United States have the potential to reap significant additional tax savings by donating appreciated securities to charity instead of cash. Securities can include stocks, bonds or mutual funds. Fidelity estimates that the additional median Federal tax savings from donating $10,000 in appreciated securities is $449¹.

For most Americans, charitable giving is an essential part of their lives. Eight out of ten (83 percent) Americans give to charity² annually. However, cash donations make up the lion's share of total giving, representing $123 billion of the total $166 billion donated in 2004 according to Internal Revenue Service data of individuals itemizing deductions.

"Although stocks and mutual funds have become a common investment vehicle for most Americans, only a small fraction ever factor in their investment gains for the purposes of charitable giving," said Steve Feinschreiber, senior vice president of research, Fidelity Investments. "The added tax savings from donating appreciated securities over cash can be significant and applicable to many more Americans who already donate to charity."

Additional Tax Savings from Donating Appreciated Securities

The report, "Smart Giving: Maximizing Your Charitable Dollars Through Donations of Appreciated Stocks and Mutual Funds," illustrates the tax savings using a hypothetical donation with a value of $10,000. Assuming a 28 percent personal income tax rate, a donation of $10,000, in either cash or appreciated securities, would result in a Federal ordinary income tax savings of $2,800. However, in the case of appreciated securities, additional savings can be realized by avoiding the capital gains taxes on the appreciation of the stock or mutual fund.

For example, if the $10,000 donated stock or mutual fund was bought initially at $7,000, an additional $450 savings would be realized by not having to pay the 15 percent Federal capital gains tax on the $3,000 of appreciation.

Any appreciated security with a long-term unrealized gain (meaning it was purchased over a year ago, and has a current value greater than its original cost) may be donated to a charity and a tax deduction taken for the full market value of the security - up to a limit of 30 percent of the donor's adjusted annual gross income (AGI).³ Since the security was donated to charity rather than sold, capital gains taxes from selling that security are no longer applicable.

"This could prompt individuals to increase their charitable giving, since investors could factor in the additional tax savings they are receiving by giving appreciated securities," said Feinschreiber.

Perceived Barriers to Donating Appreciated Securities

To better understand the barriers to donating appreciated securities, Fidelity conducted a survey⁴ of 500 households with at least $100,000 in investable assets which had reported donating $1,000 or more to charity, at least once in the past three years.

Over half (54%) of all respondents could not identify any additional advantage to donating appreciated securities even when the benefit of reduced capital gains tax was offered as a response option. Only one in three (32%) recognized the tax benefit to donating appreciated securities over cash.

Just one in twenty (5%) reported ever having donated appreciated securities to charities over the past three years. Even among those who report giving at least $5,000 to charity in 2006 alone, less than one in five (17%) reported donating securities that year.

For the 95 percent of households which did not donate securities to charity, the respondents cited wanting to keep securities that are doing well (39%), too much paperwork (23%) and gifts too small/too many (20%) as key barriers to donating securities.

Giving Appreciated Securities through a Donor Advised Fund

The report also discusses how many of the perceived logistical barriers to donating appreciated securities can be addressed with more efficient giving vehicles such as donor advised funds (DAFs). Donor advised fund programs or charitable gift account programs, provided by public charities, can make it much easier for donors to give appreciated securities compared with donating securities directly to charities without such programs.

Many public charities with DAF programs are equipped to accept securities and the donation requires one set of paperwork that is simple and efficient for the donor. A single gift of securities to a charity with a DAF program can then be easily donated among multiple charities as recommended by the donor. By contrast, giving appreciated securities directly to charities would require working separately with each charity and many smaller charities are not able to accept appreciated securities as donations or will only consider very large donations due to the administrative burdens. Giving to a charity with a DAF program eliminates these issues, making it easier for donors to gift the appreciated securities.

DAF Awareness Levels Still Low

While clear benefits exist to giving through a DAF, many Americans are still largely unfamiliar with this unique, tax-advantaged giving vehicle. Of the 508 households Fidelity surveyed, 86 percent have either not heard of a DAF at all or only know a little bit about them and only 3 percent reported using a DAF.

Overall, gifts to charities with donor-advised fund programs accounted for just $6 billion of the almost-$300 billion of charitable contributions in the U.S. in 2006.⁵

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $3.3 trillion, including managed assets of more than $1.5 trillion as of September 30, 2007. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to more than 23 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, the largest mutual fund supermarket and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

Click here for the full report and executive summary.

¹ $449 was the median potential federal tax savings on a hypothetical donation of $10,000 from an analysis of over 50,000 households with at least $25,000 in non-cash securities in taxable accounts at Fidelity in 2004.

²A 2006 online survey of 2,939 U.S. adults conducted by Harris Interactive^® between December 4 and 6, 2006 for The Wall Street Journal Online.

³Assuming the charity is a 501(c) charity. For gifts to a private foundation the limit is 20% of AGI. Amounts over 30% of AGI may be carried over for use in future years (for up to 5 years). There is also a limit on the deductibility of cash contributions though it is 50% of AGI rather than 30%. For the vast majority of households 30% of AGI is more than sufficient for charitable giving needs.

⁴ "An online panel survey targeting households with at least $100K in total assets, who also report holding securities in a brokerage account and who report donating $1,000 or more to charity within the last three years, was conducted among 508 household financial decision-makers by Richard Day Research of Evanston, IL on behalf of Fidelity from September 11-13, 2007.

⁵Chronicle of Philanthropy, May 2007.

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