Every single cash gifting program which attempts to pass cash gifting off as an opportunity to make money uses the exact same logic to try and explain its legality. Cash gifting administrators point to the language of the United States IRS Tax Code, Title 26, Sections 2501-2504 and 2511, which states that:
An individual may give as a “cash gift” up to $12,000 USD total, to as many individuals as that individual desires within a calendar year. While these gifts are non-taxable, and need not be reported to the IRS, there are conditions. In order to be deemed non-taxable, the cash gift must be given without the expectation of receiving anything in return.”
Here is where you have to avoid the putrid yellow Ferrari, the massive cartoon house, and the fake dollars and gold coins which these website attempt to distract you with, and maintain your rationality. I ask you this. Who in their right mind would send $250, $500, $1000, $2500, $5000, or $10,000 cash, overnighted mind you, to a complete stranger? The answer is, someone who is expecting something in return. Therefore, these transactions do not satisfy the requirements of United States IRS Tax Code, Title 26, Sections 2501-2504 and 2511. Anyone who avoids reporting such income is subjecting themselves to tax evasion charges. Furthermore, the Internal Revenue Service does not determine whether an activity, such as cash gifting, is legal or illegal. They just determine whether a transaction is taxable. Thus, this oft cited code does nothing to speak to the legality of cash gifting.
1) How Cash Gifting is Structured
Cash gifting programs are generally formed for the purpose of recruiting other members who only gain membership after providing their cash gift, administrative fees, and paperwork to individuals already within the program. Most of these programs, if not all of them, offer absolutely no product, or service, and attempt to distinguish themselves from the illegal pyramid scheme with structural creativity.
2) The Classic Cash Pyramid (Illegal)
This cash gifting structure has been around for decades, if not an entire century, and has lead to the drafting of specific legislation in numerous countries (including the United States) to outlaw these sorts of clubs. Often referred to as pyramid schemes, due to their “infinite″ geometric progression and impossibility of sustainability. It is based on a business model, which will knowingly eventually fail due to the fact that there are not enough people on the planet earth to sustain it. This form of cash gifting involves the transfer of money, primarily for recruiting other people into the pyramid, usually without a product or service being obtained in exchange.
3) The Modern Day 1-UP Structure of Cash Gifting
This form of modern day cash gifting is perhaps the one which you are most familiar with. It really hit the Internet by storm in the late stages of 2007. In order to distinguish itself from the aforementioned pyramid scheme, which has been conclusively deemed illegal, administers of these programs became creative. They came up with what is called the 1-Up Cash Gifting Structure. Within this structure, there is arguably no infinite pyramid. Rather, the structure creates a beginning and end, referred to as a receiving line. For instance, Person A brings Person B into their cash gifting scheme. Person B then immediately brings Person C into the scheme. However, Person C does not send money to Person B. Rather Person B must pass up their first gift to the person who brought them into the program. Hence, Person A receives money from Person C, which is why this is called 1-Up cash gifting. Once the 1-Up has occurred, the receiving line between Person C and Person A is broken, and Person B is able to recruit people into the scheme and take their money. *To learn more about these schemes, please visit the website listed at the bottom of the page.
Nonetheless, we know of no black letter or case law to determine the legality or illegality of this structure. Perhaps this is due to its infancy. Regardless, it resembles too strongly past pyramid schemes which have ample black letter and case law to be deemed felonious in a myriad of states, as well as countries around the world.
With that being said, it is really up to you whether you choose to participate in something like this or not. As you may have gathered, I am 100% against any scheme which does not have a seller, a buyer, and a legitimate product which is not being purchased for any reason other than a desire to own the product. Right now 1-Up cash gifting is in a grey area. You do not want to be the first defendant in State v. Your Name Re: Cash Gifting Scam. Moreover, even if you are willing to send cash in an envelope to a complete stranger, other people will not be so willing to do so, and you will be the stranger who is trying to recruit them. With this resembling a pyramid scheme so closely, you will have a difficult time convincing someone to not only send a stranger money, but put themselves at risk for being prosecuted legally. It is my firm conclusion that cash gifting is in no way shape or form an answer to the question of how to make money.
Do not fall for the Cash Gifting scam. To learn more about Cash Gifting and why you need to stay away, visit analogiclabs.com.
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