Definition of Cash Gifting

For all intents and purposes, cash gifting is simply a way to gain additional money and lessen the tax burden of members who participate in the many programs operating around the world. A system that has been in place for centuries and sometimes thought of, but not legally labeled as a Ponzi scheme, cash gifting is a system whereby members gift each other, according to a detailed pyramid flow chart, and then recruit new members to keep the gifts flowing. It is legal and anyone can participate, as long as each member has the funds to do so.

Definition

"Cash gifting" is approved by the IRS under Tax Code Title 26, Sections 2501-2504 and 2511. Used as a legal and legitimate means of reducing an estate, an attorney, accountant or estate director can "gift" individuals up to $12,000 within a calendar year to reduce the tax burden for the year in which the cash gift was made. Because beneficiaries are not required under the law to declare or pay tax on that money, the gifter must declare he did not receive any monetary or other compensation for the gift.

Restrictions Under the Law

Restrictions apply regarding how cash gifting programs are labeled under the law. Cash gifting programs are not considered an "investment," as investments fall under SEC regulations and are subject to criminal penalties for members who engage in illegal investment practices. Cash gifting programs are also not considered "business opportunities," because, as CashGiftingWatchdog.com notes, "That name implies the existence of a contract between a buyer and a seller, for goods or services and would be regulated by state laws." Generally, cash gifting programs are labeled as those that require membership fees for operational costs.

How the System Works

Cash gifting programs require members to pay a joining fee. Each member receives money based on the number of and degree to which "new" members contribute to the system through cash gifts and other membership fees. Each member is required to pay a joining fee as well as monthly membership fees. Within the rules and restrictions of each individual program is the required gifting amount that must be paid by each member to continue his participation in the program. A member cannot join a cash gifting program without an initial payment of this cash amount. Forming a kind of pyramid, all gifts must be freely given and received without any compensation exchanged in return. To guarantee the cash gifts flow in a circular system, meaning Person A "gifts" Person B and Person B "gifts" Person C without a gift "flowing" back to a previous recipient, all gifts (monetary transfers) are monitored and tracked. To keep the pyramid from drying up, new members must continuously be recruited to join the program.

The Life Cycle of a Program

A cash gifting program is only as good as its members. If members do not market the program to new members and those members to new members, the potential for the system to "dry up" is high. According to CashGiftingWatchdog.com, "Money contributed by an incoming member goes to the top of the pyramid immediately, while the penniless member sits at the base of the pyramid until enough other members join to completely pay off the member at the top and move everyone else up a notch."
A member can move on after he is paid off. However, to sustain the life cycle of the program, members are encouraged to continue the program and recruit new membership. For example, members may be required to recruit a set number of "new" members before being allowed to leave the program or before their "pay out" can be obtained.

Warning

Cash gifting is legal, but members should be aware of the warnings before joining. Because cash gifting programs rely on new membership to generate new wealth for members, a program can close at any time if the gifts (i.e. the money) dries up. In the end, cash gifting programs are made up of strangers gifting strangers in the hope that after older members are paid, new members will receive a "pay out."
It is not uncommon for new members to lose money or have to wait long periods of time before their "gifts" trickle down.

References

• Gift Giving Watchdog