Is sending money in a mail order scheme legal?

Q: What should I do if I receive a chain letter?

If you receive a chain letter that asks for money, it's advisable to report it to your local postmaster or Postal Inspector. You can state that you believe the letter may be illegal. Reporting helps authorities address potential fraud and protect others from similar schemes.

Q: Can chain letters be considered gifts for tax purposes?

Even if a chain letter claims that money sent is a gift, it does not change its legal status. Chain letters that require payment are still illegal. Additionally, gifts over a certain amount may be subject to tax regulations. It's best to consult a tax professional for specific advice regarding gifts and tax implications.

Q: What are the risks of participating in a mail order scheme?

Participating in a mail order scheme, particularly chain letters, poses significant risks. Most participants do not receive money back and often lose more than they invest. The structure of these schemes relies on a constant influx of new participants, which is unsustainable. It's generally considered a poor investment choice.

Q: How can I identify a fraudulent mail order scheme?

Fraudulent mail order schemes often promise quick and easy money in exchange for sending payments to others. Look for red flags such as promises of high returns, requiring you to recruit others, or vague descriptions of how the money is generated. If it seems too good to be true, it likely is. Always exercise caution.

Full question:

Is this legal as termed in the mail order business? You receive a packet of information asking you to send $1 to each of the people on the list. You then retype the list inserting your name at the bottom and removing the top name and send it to 200 people. If X% of people respond, you will receive X$ in so many weeks. It is purported as 'mail order' (and legal) because people are paying you to be put on your mailing list. The receiver would then keep records and claim this money as income for the IRS. If this is not legal, could it be made legal to include a form stating that the sender is 'gifting' this money to the receiver. The money then would not be considered as income for tax purposes.

Category: Donations
Date: 04/07/2025
State: Texas

Answer:

A chain letter is a type of scheme that promises participants they can make money quickly by sending money to others. Typically, you are instructed to send a small amount, like $5, to the person at the top of the list, remove their name, add your own to the bottom, and then send copies to others. The promise is that as more people join, you will receive money back.

However, chain letters are illegal if they require payment and promise substantial returns. They are considered a form of gambling, violating Title 18, United States Code, Section 1302, known as the Postal Lottery Statute. While chain letters that ask for items of little value may be legal, those that involve money are not. Even if a chain letter claims to be legal or endorsed by the U.S. Postal Service, this is misleading.

Participating in a chain letter is generally a bad investment. Most participants do not receive money and often lose more than they gain from sending out the letters. The structure of chain letters ensures that not everyone can win, as the system relies on an ever-decreasing number of new participants. If you receive a chain letter that asks for money, report it to your local postmaster or Postal Inspector by stating, 'I received this in the mail and believe it may be illegal.'

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Are chain letters legal in the U.S.?

Chain letters that require payment and promise substantial returns are illegal in the U.S. They are classified as a form of gambling and violate the Postal Lottery Statute (Title 18, U.S. Code, § 1302). While some chain letters may ask for items of little value, those involving money are not permissible. It's essential to avoid participating in such schemes, as they often lead to financial loss.