Publication 950 also talks about the parties that are exempting to the gift tax. These are both the person giving the gift and the individual that receives the gift. This includes money gifting up to an annual limit of $13,000.00. (The amount of the exemption went from $12,000 to $13,000 in 2009)
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As far as what a person should do that is already involved in the gifting activity, you should talk to a tax professional, either a certified public accountant or an attorney specializing in tax law. Personally, I decided to pay taxes on my profits a long time ago and continue to do so. This is no big deal to me as I am fairly used to doing it for my other business activities already, but I am a bit concerned that someone getting involved with cash gifting thinks because it is a gift, under $13,000 per year, that everything is exempted from taxes.
The rule of thumb here may be the way that you promote the cash gifting activity. Now, if you give your gift freely and without any expectation of receiving any gifts, then sure, anything you may receive is exempted. However, if you are promoting a gifting program in a similar fashion as anyone promoting any type of online money-making activity, then I would have to say that maybe you are going to have a tax liability at the end of the year and you should probably prepare yourself to pay your taxes. Yes, I can't stand what "they" do with the money in D.C. either.
In the end, if you are unsure of how to proceed, I would still confer with your CPA or Attorney. Cash gifting is a phenomenal activity that can really change your life, but if you are not doing things legally or ethically, well, it's sort of hard to spend any profits, be they gifts received or money from a business venture, in the cross bar hotel.
