Cash Gifting Watchdog

Right now, the cash gifting frenzy has turned its focus to Abundant Living System (’ALS’ for short), which, with its “patent pending” (we could find no patent application under ALS in the US Patent & Trade Office records) “cash credit system”, now has a way for people to move up the cash gifting level ladder without actually spending cash - they simply get credit for half the money other people spend. But does this change really matter?

Here’s an excerpt from an ALS website:

Depending upon your initial ALS entry level, and for each and every new member you refer into the program, you’ll receive joyous cash gifts ranging in value from $150 right up to a MASSIVE $5,000 - and you’ll have it delivered direct to your door by secure overnight courier.

But the same ALS website also proclaims, in its FAQ section:

The concept of private gifting is based upon the fact that both American and Canadian citizens have the Constitutional right to gift property, cash and other assets, and are subject to the rules and regulations established by the laws. The U.S. gifting rules are found in the IRS Tax Code, Title 26, Sections 2501-2504 and 2511.

The law states that one or more individuals can give a gift to another individual of up to $12,000 each per calendar year without any tax liability to either the giver or receiver of the gift, because the tax on the gift has already been paid.

What this ALS site does not bother to mention is this excerpt from the IRS’ own page devoted to questions on gift taxes:

What is considered a gift? Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.

In other words, the Abundant Living System promises that you’ll receive “joyous cash gifts,” and that the IRS is perfectly fine with this, are bogus. If you get as much or more money back from the program as you put into it, you’ll no longer be getting a gift, and you’ll have to pay taxes on it.

But there’s more from the ALS website, regarding its system of levels. Here’s another direct quote:

Whenever any of your direct referrals invites a new members in to ALS, and they decide to join at a higher level than your referral is presently at, that cash gift will bypass them and pass up to you (as their inviter). That sucks for your direct referral as they’ll miss out on that gift (because they can only receive gifts up to a maximum of the levell (sp) they’re at) - but again it’s ANOTHER CASH WINDFALL FOR YOU because you were smart enough to join at a higher level!

Does that sound like a fair system which is “TRULY affordable for anyone!” Sure, you can begin at their $150 level (and their “administration fee” of $50). And then you can sit and watch all the money from any referral you get who put in more than $150 go to someone else. That’s because you weren’t “smart enough to join at a higher level!”

Here’s the question: If the ALS system is so irresistible, why won’t there be so many people lining up to join that everyone can get in at the $150 level and simply keep collecting $150 over and over again? Why bother with higher levels at all?

ALS also dodges the pyramid scheme label under the IRS Title 26 banner, and claims that it’s not a company, (presumably because companies do business and business contracts are regulated under state laws). We wonder, in that case, to whom the required $50 administration fee is being paid.

As to its one-up structure saving it from prosecution, both the SEC and numerous states have gone after one-ups and cash gifting clubs for investment fraud (see Cash Gifting & The Law for more).

Because ALS is relatively new to the cash gifting game, with its first sites showing up on July 17, 2008, we haven’t found complaints being lodged by unhappy participants to this point. If the records of the other four cash gifting schemes are any indication, complaints about Abundant Living Systems are only a matter of time.