In reviewing the phenomenon of cash gifting, the oldest I have found on the internet claims to have been around for 14 years. The other older programs appear to have been operating for five to ten years.

The literature states that these methods have been used for many years by the wealthy to basically share income.

The principles legally apply to the IRS approved gifting codes. “The rules do state that “For calendar year 2007, the first $12,000 of gifts to any person (other than gifts of future interests in property) is not included in the total amount of taxable gifts made during that year”. The official IRS website gives a lot of detail regarding tax free cash gifts to any one individual in any given calendar year, there appears to be no limit to the number of gifts any one individual can receive from different giftors in a calendar year.

All of the programs that looked at seem to comply with the rules of the IRS and several go through great lengths to clarify to visitors to their sites that the whole process is legal and not a scam. Several programs approach the topic from a religious point of view and even quote the bible. another say it is the only one set up by a lawyer, although that does not to be significant in the overall scheme because it appears legal anyway.

All of the programs include a gifting statement that states the person giving the cash gives it freely without any product or service being exchanged or traded and has not been coerced.

The most compelling reason I can find for believing it is legitimate is that these programs have not been shutdown by the IRS.

The most properly structured - legal gifting program currently is SOW TODAY!.
It is only gifting program that involves no calling of your prospects. Its definetely worth taking a look at.

The Annual Gift Tax Exclusion

Whether helping the kids with a down payment on their first home, paying the premiums on a life insurance policy in an irrevocable trust, or moving appreciated assets to a younger generation, annual gifting will touch the lives of millions of Americans. But before the transfer is made, an investor should spend some time looking at the investment and the tax ramifications of the property to be passed.

Much of the gifting itself will be done under the Annual Gift Tax Exclusion, a method that alleviates both a gift tax and the need to report the transfer. This exclusion applies to gifts only between individuals. Gifts made to charities and other organizations fall under a completely different set of rules.

The transfer is not deductible by the donor nor is it taxable to the recipient. Currently, the annual exclusion is set at $13,000. In the future, this can be adjusted for inflation, but only in $1,000 increments. Spouses can increase their gifts to others to a maximum of $22,000 and, finally, gifts between spouses, like love, knows no limits.

Most transfers are done for one of two reasons. In the past, passing along property to diminish the value of an estate and, therefore, estate taxes was a major consideration in estate planning. This is still used extensively for larger estates but, under current law, fewer estates are subject to the tax. If the estate has no tax exposure (and if nursing care is taken care of), many advisors recommend not to gift at all but, instead, toallow the assets to receive a “stepped up” tax basis upon death.

Gifting to allow for current use of assets has been and continues to be popular. Often a parent wants to see a child use the gift immediately in order to enjoy an extended vacation or to make a major purchase. Here, it is expected that any gift of securities will be converted into cash with the appropriate tax paid.

Both donors and recipients should be aware that various gifts for educational or medical purposes may not reduce the annual exclusion. You should check with your tax advisor to determine whether this applies to a your specific situation.

Certain kinds of property (real estate, art, collectibles, closely held business interests, etc) should be appraised before a transfer is made. Consulting an expert in the particular field is usually a good idea to calculate the fair market value of the property.

Another circumstance requiring professional help is when “spending down” an estate for Medicaid purposes. An elder law attorney should be consulted for help in this area.

The actual gift of marketable securities or cash is fairly straightforward. Giving a check to someone or journaling over securities is enough to complete the gift. However, before making the gift, you should understand some of the potential tax considerations.

Let’s first look at stock that has appreciated in value. Remember, whatever tax basis the donor in the gifted property will become the recipient’s tax basis. If the donor is in a higher tax bracket than the recipient, it is often wise to gift the stock to the recipient and let the recipient sell the stock at his or her lower tax bracket.

If the fair market value of the stock is below the donor’s original cost, then the donee must use the fair market value of the property as of the date of the gift in determining his or her tax basis. If you find yourself in this situation, the donor should consider selling the asset and then gifting the cash proceeds to the recipient.

Obviously, there will be times when a gift needs to be made regardless of the consequences; but, when time allows, you should do your homework to see what works to your best advantage.

Hope that was helpful,
Merudh

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