cash gift business

[POCAHONTAS]

client has business called ABUNDANT LIVING he says, the way it works is that you send and receive $25 to each other and you send it as a gift so it would not be taxable. He says he has lost money on it and wants to take the loss, has anyone else come across this if so is this legit how would I deal with this and if the money is given as a gift then you couldn't really use it as a business could you? it sounds like those chain letters they had a few years ago any input will be highly appreciated.
Thanks

[JG EA]

From what I was reading - chain mail is illegal through US Mail but not through email. But sending money through the mail would be non deductible when there is no business loss involved. It couldn't be viewed as investment either. And if it is illegal then the money he got would be reportable but no loss deductible.

[Jesse]

You can't make this stuff up....

People really believe this! It sounds like the Abundant Living System (ALS) is built on the premise that you can give and receive gifts and what you receive is just that - a gift, therefore not income. On the same premise what he lost was the "gifts" he gave and not deductible.

But that is just my opinion.

[POCAHONTAS]

ok so he said that he kept on sending the $25.00 gift to others and never received any back so he lost approximately $800 so therefore he received no income and he sees this as a business and wants to take the loss??

[Jesse]

Key word "gift":

ok so he said that he kept on sending the $25.00 gift to others

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html#2

May I deduct gifts on my income tax return?
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 950, Introduction to Estate and Gift Taxes.

[POCAHONTAS]

thanks jesse

[veritas]

So if he receives income

client has business called ABUNDANT LIVING he says, the way it works is that you send and receive $25 to each other and you send it as a gift so it would not be taxable.
Thanks

it's not taxable but if he doesn't receive anything it's a deductible loss?

[taxea]

Review on ALS

http://topcashgiftingprograms.com/abundantlivingsystem

[POCAHONTAS]

but don't you have to have some kind of income to make a loss on schedule C, and if not schedule C where would you take the loss. Besides if the gifts are not taxable then they wouldn't be deductible either right???

[DaveO]

Can't have it both ways. One of these groups was investigated here a few years ago. It was called Ultimate Dinner Party or something like that. It ran afout of some anti fraud rules.