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Cash Gifting Review | The Truth About Cash Gifting

October 4, 2008

Are cash gifting programs legit or will the IRS be showing up at your doorstep with cold metal handcuffs with your name on them?

If you or someone you know is involved in the activity of cash gifting stop and read this whole message.

In this special cash gifting programs review you’ll discover:

  • what is cash gifting
  • who is involved with cash gifting
  • who is being targeted
  • Is is really different from marketing a business with a product?
  • Is it an illegal activity, and Finally
  • what you need to know before you consider a cash gifting program.

This cash gifting review started of by simply asking a few probing questions amongst my marketing friends a few weeks ago.

Since I’m the owner of ProBusinessReviews.com, I figured that this would
be fitting for me to do serious research on the subject of cash gifting.

The moment I started,  I’ve been searching HIGH and LOW reading articles, following heated forum debates and getting feedback from a few marketers that happen to have legal backgrounds.

One thing is for sure, the pro cash gifting crowd is very passionate about what they do.  During this review I’ll be covering various angles and providing you thoughts & information that you need to have in order to make a fully informed decision.

Disclaimer:
Now, I’m not a lawyer.  Nor do I have a legal background.  Heck I didn’t even complete college (i’m just a successful marketer who has studied the art of internet and direct  response marketing). I say this because ANYTHING that I share in this report is just my personal findings and views.  I’ll provide you with links and information for you to do your own due diligence on cash gifting.

So What is Cash Gifting?

Cash gifting alone is the act of giving a cash gift.  There is nothing illegal about giving a gift of cash.  You and I have received gifts of cash all throughout our lives on birthdays, holidays, and special occasions.

Ok. So now we now that the act of giving a gift of cash in itself is legal.  You can even give thousands of dollars from an individual (up to $12,000 for 2006 -2008) see  (IRS Tax Code, Title 26, Sections 2501-2504 and 2511 page 6)  and not have to pay taxes if done properly. (keep reading)

Who is involved in cash gifting.

The question now is who is NOT involved with cash gifting.  I just received ANOTHER email from a top marketer on YouTube stating that HE’S now involved with it.  It seems that people from every walk of life is involved with Cash Gifting (or Cash Leveraging as many of the internet gifters call it).

I use to think that strange people only were involved, but in the past few months so many people have been partaking in this activity that I can no longer say that — because some of them are my marketing buddies.

If you’d like to see some brilliant marketing systems just have a look at some of the cash gifting marketing systems and programs available (just google the names)

  • Abundant Living System
  • The Overnight Cash System (TOCS)
  • Epic Wealth System
  • Ecosov (Too Damn Easy, aka Q the cash gifter)
  • Secret Money Factory
  • Perpetual Cash Group
  • and many more are popping up every week to attract
    a new base of cash gifters.

Who is being targeted for Cash Gifting Programs?

The targets are the same as any business opportunity.  Those who are looking to make a significant amount of money using the internet and their telephone.  (Pretty common now that Wall Street has been having a difficult time - and the writings on the wall that the worst is yet to come AND probably won’t let up for a LONG time).

Some local groups involved in cash gifting clubs however target small communities and local organizations such as churches.  Typically these cash gifting groups are blatant pyramid schemes.

Is Cash Gifting REALLY different from marketing a
traditional business opportunity or product?

The truth is the process of marketing is the same - at least the next generation of cash gifting programs.  And that’s why some of the marketers I know have involved themselves with Cash Gifting.  The process is drive targeted traffic to a website, collect a name, email address, and phone number - follow up via phone and email - invite to an overview call - close the prospect.  (sounds like business activity to me.)

Now there are variations to the systems depending upon what company you join.  Companies like NOSS (Number One Success System) are all about working the phone.  They would fall into the category who believes “Low Tech, Big Check”.

And then there are cash gifting programs who use automated marketing systems - which appeal to people’s lazy side - sad but true.

Marketing a cash gifting program have little to no difference than marketing a business, product, or service. (which raises a flag about the legality - keep reading)

Is Cash Gifting an illegal activity?

Ok, here’s where ALL the controversy begins.  This is probably what YOU wanted to know and what the nay-sayers and advocates are willing to spar about.  Cash Gifting is definitely a gray area. The IRS tax code that I referred to above has to do with TAXES.

It doesn’t necessarily have to do with the legality side - for that we’ll have to check in with our State’s Attorney General AND the FTC (Federal Trade Commission).   This doesn’t come out and talk about the “1-up Cash Gifting Programs” but has some insight about the subject: FTC on Cash Gifting

(there are some REALLY GOOD tips on joining ANY type of business opportunity or cash gifting program on the FTC website)

There are two types of cash gifting programs
  1. Gifting Clubs
    This type of club often originates in communities and churches and is a classic pyramid scheme where most of the new money rolls up to the person who started.  It’s 100% dependent on NEW people coming in to sustain itself.  You can learn more about these types of gifting clubs at the FTC website above.

    The next type of gifting scenario is:

  2. 1-UP Compensation plan
    The 1-up compensation plan is similar to the Aussie 2-up comp plan.  Simply put you pass your first sale up to the person who brought you into the business.  It’s designed to create leverage for yourself down the road when you have recruited a small team and they start to do the same.
    Other top tiered (legitimate) direct sales businesses use this compensation plan.
The difference between a classic pyramid scheme and a 1-up comp plan is that the pyramid is destined to collapse the whole organization where as the 1-up is dependent upon self production.

Pyramid Schemes are illegal.  Most companies who use a 1-up compensation plans are legal.  Not all, but most. (example: Prosperity Automated System was shut down in 2006 by the SEC)

Now the question comes in -

“We know that giving a cash gift is legal… but what about when it is tied to a compensation plan?”

This is where I’ve had a difficult time finding actual governmental documentation.  The only “words of wisdom” that I’ve found come from the website of the FTC:

“Consider that a legitimate gift has no strings attached and is not an “investment.” Avoid being misled into thinking a gifting club is legitimate because the ads say that members consider their payments a gift and expect nothing in return. This is an attempt to make an illegal transaction look legal.”

At this moment I’m going to ask you to click over to a fellow colleague and friend of mine, Robyn Reiken.  She is a retired attorney and provides some common sense knowledge (NOT legal advice) on the subject of cash gifting… Here’s what Robyn has to say:

Is Cash Gifting Legal or is Cash Gifting a Scam?

If you didn’t read Robyn’s hubpage, here’s probably the most common sense thing she says:

“THE Reason that “Gifting Programs” are illegal is this: By definition: A “GIFT” is money or services or anything of value which is given freely with no expectation of receiving anything in return.

The Fact that you and everyone you promote your “gifting business” to signs a piece of paper stating that they are freely giving a gift and are expecting nothing in return DOES Not MAKE IT A GIFT. The Fact that you sign a piece of paper that states that you are not engaging in a business does not change the fact that you are engaging in an activity with the express purpose of making a profit which is by definition a business.

I hate to be the bearer of cliches, but if it looks like a Duck, and walks like a Duck, and quacks like a Duck….signing a piece of paper that declares it a Cow does not make it so.”

Thanks Robyn for some wonderful insight between the difference of a duck and cow :)

Ok, by now you might be saying:

“Gee Seth, I thought this was supposed to be an objective review?”

To that I would say

“Yes, it certainly started that way”

As I began to do my own research I began to piece together information that leads to an undetermined conclusion.

Why would someone promote cash gifting
rather than a business with a real product or service?

Many marketers who have fine tuned their skills over the past few years have turned to cash gifting because they realize one thing.  The product doesn’t make a difference in the response rate of their marketing.

As long as the marketing is good and the system is converting “who cares what the product is…”  - at least that’s what the people I’ve spoken with have said.

I don’t agree.  I believe the product must absolutely bring value to the marketplace in order for a business to thrive long term.

Why are so many turning to cash gifting at this time?

Here’s the deal.  Currently in America and other parts of the world the economy is currently in a major slump.  I’ll withhold most of my opinions and thoughts as to why this is, but the fact is people are scared.

They are looking for a way out of their situations.  When people get desparate they tend to do things with an irrational mind.  The fear DRIVES them into an action which they think will be beneficial.  Or worse, they attempt to throw money at a problem in hopes of providing a quick fix to years of bad finiancial decisions.

This is not just cash gifting, but business opportunities in general.

The marketers in most cash gifting programs know this - they write their adcopy to turn up the pain and persuade you that ‘the offer’ will solve all of the readers financial worries - when the truth is you must get HONEST with yourself and take a HARD look at your life, your patterns of behavior (positive and negative), and seek help.

I’m not talking about a phsycologist or counselor.  Probably the best help would be a life coach or business coach.

The bottom line is people are turning to cash gifting to ‘cash in quick‘.  The success numbers will be no different than joining a business opportunity.

IT will not be “easier”.  The only thing that you may have going for your program is a kick-ass marketing system.  But even the best marketing systems will eventually fade and go away.  (that’s why personal branding is SO important).

Guess I went off on a little tangent. End of rant.

What you need to know before joining
a cash gifting program.

  1. Do your COMPLETE personal due diligence.
    Every states laws vary.  If I were to consider joining a cash gifting program I would first contact my State Attorney General.  Then I would contact a local attorney who has experience with cash gifting or network marketing (not saying that network marketing is anything like cash gifting, just saying that an qualified network marketing attorney may be familiar with cash gifting programs since often times it attracts the same crowd.)
  2. Find a Marketing Mentor
    If after doing your due diligence and are ready to accept any risk - find a marketing mentor.  Marketing your cash gifting program is NO different than marketing a travel business opportunity, mlm company, or high tiered product.

    You MUST brand yourself for long term success.  Finding a mentor who has successfully branded their self AND has taught others to do the same.  These mentors may hold weekly webinars and have a training site where you can turn to for education.

  3. Follow your gut
    If there is a “check” in your gut about joining a cash gifting program - WAIT.  Don’t do anything in the spurt of the moment.  Especially if you NEED an influx of cash yesterday.  Take your time and make a decision based on logic rather than emotion.

    Once you make a decison - that is the time to turn up the emotion and REALLY get involved in what you’re doing.  Us entrepreneurs lead with our heart - we’re passionate people.  We just need to make sure that we use our brain in accordance with our heart.

Cash Gifting Resources for further education.

In my research I dug up more resources than I can share with you - that’s why I did this cash gifting review.  Here are some of the notable and reputable sources I’ve found.

  • Cash Gifting Watchdog
    A highly informative site that I came across at the tail end of my research.
  • IRS Tax Code regarding Cash Gifts
    This is the section which virtually every cash gifting program refers to.  Read the WHOLE document and see for yourself if what you are doing qualifies as legal under this code.
  • Rod Cook MLM Watchdog
    This site provides quality credible information about our industry. Rod is well known and has a plethora of experience.  Don’t be fooled by his amateur looking website.
  • FTC’s Article about Cash Gifting Clubs
    This doesn’t specifically talk about the “1-up” comp plan that most cash gifting programs follow, but contains some common sense knowledge that you should read before committing to any such cash gifting program.
    and to be completely fair, I’ve included this video from a live caller contacting the IRS:

    (just remember that a gift is a gift with NO expectations
    of a return or obligation.  Can you say that when you JOIN
    a cash gifting program you have no prior expectations of
    receiving ANY gifts in the future??? food for thought)

Final thoughts regarding Cash Gifting.

  • I do not personally believe that the majority of those involved in cash gifting programs are a scam artists.  Some of my marketing friends are some of the best people you’ll meet and they do really support their teams with quality training and mentorship.  They truly want to see you succeed in your online marketing efforts.
  • Cash Gifting is not for me.  I know people who swear by it and say that it converts better than anything they’ve been involved with.Again, my level of comfort with cash gifting as a way to make a living is not there.  Based on MY research and due diligence I could NOT consciously pursue this activity and potentially place myself and family legally at risk. (not to mention my reputation)
  • If you are TRUELY looking for a way to create an additional income on the internet - then the best place to start would be getting educated in the art of marketing.Marketing is what drives any business (that’s why cash gifting is so appealing - smart marketers are packaging the presentation in a way that appeals to those who are looking).
  • So get educated in marketing.Those who succeed in this fun business of internet marketing are those who have invested in their education.  You can’t become a master builder of homes without LEARNING… same applies here.

Thanks for reading this extensive review.  I welcome your comments and thoughts below. If you have an opposing view PLEASE post the information that reveals clear evidence of the legality of cash gifting from a markeitng / business standpoint, PLEASE post for all to see.

I’m not claiming that I know everything, I’m simply sharing my findings on the subject of cash gifting and cash gifting programs.

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