Each cash gifting scheme which you will come across on the Internet attempts to paint cash gifting as some legal and legitimate opportunity. They do this by citing United States IRS Tax Code, Title 26, Sections 2501-2504 and 2511. Essentially, these sections of the tax code say the following:
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
Essentially, the way in which cash gifting programs work is that one individual, who is already a member, recruits another individual, who is not yet a member, into the program. To gain membership, the recruited individual sends their "cash gift", pays the administrator of the scheme a fee, and fills out some paper work stating that they do not expect anything in return, even though they do. I know of absolutely no cash gifting scheme which actually "sells" a legitimate product or service. Nonetheless, the way in which these schemes attempt to contrast themselves with the illegal pyramid scheme is by being somewhat deviceful.
2) Traditional Cash Gifting Clubs (Pyramid Schemes)
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 is most likely what you have seen polluting the Internet. To differentiate itself from illegal pyramids, which are illegal due to their infinite nature, and lack of sustainability, a 1-Up cash gifting was created. With such a structure, there is arguably not infinite chain. Instead, a beginning and end is unnaturally created. The line which this beginning and end form is referred to as a receiving line. Here is how it works. Subject A, who is already a member of the scheme, recruits Subject B, who is not yet a member. Subject A somehow convinces Subject B to overnight cash to them and become a member of the scheme. Thereafter, Subject B is able to convince Subject C to become a member of the scheme. Although Subject B recruited Subject C, Subject B is required to pass up their first "gift" to Subject A. This is where the name, 1-Up comes from. Once the 1-Up has taken place, the receiving line between Subject C and Subject A no longer exists. Thereafter, Subject B will receive "gifts" from future individuals who they recruit into this scheme. *For a more complete explanation, please go directly to the website listed at the bottom of this page.
At this time, there exist no laws determining the legality or criminality of these 1-Up programs. I feel that this is in large part due to the fact that such schemes are still relatively young. Nonetheless, it look way too much like the pyramid schemes which we know are illegal, and people have been convicted of partaking in.
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.
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
Essentially, the way in which cash gifting programs work is that one individual, who is already a member, recruits another individual, who is not yet a member, into the program. To gain membership, the recruited individual sends their "cash gift", pays the administrator of the scheme a fee, and fills out some paper work stating that they do not expect anything in return, even though they do. I know of absolutely no cash gifting scheme which actually "sells" a legitimate product or service. Nonetheless, the way in which these schemes attempt to contrast themselves with the illegal pyramid scheme is by being somewhat deviceful.
2) Traditional Cash Gifting Clubs (Pyramid Schemes)
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 is most likely what you have seen polluting the Internet. To differentiate itself from illegal pyramids, which are illegal due to their infinite nature, and lack of sustainability, a 1-Up cash gifting was created. With such a structure, there is arguably not infinite chain. Instead, a beginning and end is unnaturally created. The line which this beginning and end form is referred to as a receiving line. Here is how it works. Subject A, who is already a member of the scheme, recruits Subject B, who is not yet a member. Subject A somehow convinces Subject B to overnight cash to them and become a member of the scheme. Thereafter, Subject B is able to convince Subject C to become a member of the scheme. Although Subject B recruited Subject C, Subject B is required to pass up their first "gift" to Subject A. This is where the name, 1-Up comes from. Once the 1-Up has taken place, the receiving line between Subject C and Subject A no longer exists. Thereafter, Subject B will receive "gifts" from future individuals who they recruit into this scheme. *For a more complete explanation, please go directly to the website listed at the bottom of this page.
At this time, there exist no laws determining the legality or criminality of these 1-Up programs. I feel that this is in large part due to the fact that such schemes are still relatively young. Nonetheless, it look way too much like the pyramid schemes which we know are illegal, and people have been convicted of partaking in.
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.
About the Author:
Do not become a victim in the Cash Gifting scam. To find out more regarding Cash Gifting and why it should be avoided, visit analogiclabs.com.
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