In addition to building a healthy foundation through developing trustworthy relationships, one of the most important tasks of the partnering team is assessing the level of contribution each partner provides to the overall success of the project. Each member of the alliance has completed an internal assessment identifying its own needs and learned how it can help satisfy its partner’s needs. It is during the initial activity that the whole puzzle comes together. It is at this stage that each member begins to realize how its individual contributions are turned from proposed benefits into tangible assets. This is accomplished by bringing the partnering team together and designing a plan to implement a task.

To begin the initial activity process, assemble the team that will be responsible for implementing the activity. Once the team is together, review the Initial Activity Team Checklist (Exercise 15) for use during the team-building and planning session. This session will probably take place over a period of days or even weeks, depending on the scope of the activity. The checklist covers both the Stages of Relationship Development and the Stages of Partnership Development. In the initial meeting it is important to spend time on developing the relationship. Note, however, that people will want to move right to tasks. It is important that they understand that by establishing the relationship issues first, they will save time in the long run. Ultimately, when people go directly to tasks, relationship issues impede task development, causing conflict and frustration.

In our Bank of America/Exult case, the task portion of the business was easy. Each team had process integration people paired up to ensure seamless flow of information and data between the two organizations. But it was the time spent up front that enabled them to build trust with each other, helping them endure the tough times.

Building a partnership always takes longer than people anticipate. Therefore, you need to plan time for relationship development. Conduct team-building exercises focused on the task–relationship dynamics. Make planning the task a part of the team-building activity. You’ll be amazed at how well this technique works.

Make sure key leadership is present to kick off the initial activity. When key leadership is visible, the partnering activities are generally more successful. Key leadership being absent sends the nonverbal message “This is not important.” Plan a launch. Invite people in the organizations to witness the kickoff. Write articles in the employee newsletters and provide media releases. Send the message “This is important! You are partnering with another business and you can look for these benefits.”

Make sure everyone knows the partnership’s vision and goals and inform them when these change or are updated. Keep this information in the forefront of people’s minds. One sure way to kill a partnership is to be ambiguous about or miscommunicate the vision and goals for the partnership.

I see a clear parallel with business partnerships. The time we spend getting to know our partners will pay off in terms of more trust, less friction, and more productivity in the end. In the Initiate Stage of Partnership Development, we can plan to limit pressure by negotiating realistic timelines and defining ahead of time how we’ll measure our success. We can clarify what we want from each other up front and agree on our partnership mission. Like the astronauts, we can be clear about what tasks we need to perform. But we can also commit to developing the relationship with our partner as a prerequisite for success. In the Initiate stage, we start to move away from planning our partnership and toward the activities we created the partnership to accomplish. In other words, now we are ready to start a task.

When initiating your partnership, it is important to remember to keep the task and relationship activities balanced. Spending the time up front will result in exponential benefits in the end. In the first trimester of development, you want to spend about two-thirds of your time on relationship development and about one-third on task design. This is also true once you have identified your partner and are initiating an activity. It is important to build the relationship with the partnering team implementing the initial activity. The challenge at this step is to build a strong relationship between the partners while creating a plan for a successful task.

There is one more technique to avoid paying the taxes due on some of the profit from your real estate. This is by securing new financing to pay off the existing loan and net additional cash at the closing because of the increased value of the property. If you are still in the equity-building years of our plan, you will probably use that money to acquire an additional property. One of the great advantages of getting at some of the profit using this method is that there is no tax due on the money. Because we “borrowed” the money from the bank, we have to pay it back, and therefore, not only do we not have to pay any tax, but right now we can write off the interest as a deduction on the property.

Owners who have properties that are managed particularly well prefer this technique. What’s more, if you’ve managed your property correctly, the increased rents should more than cover any increased mortgage payments. If you are in a market where you can pull out most of your equity to move into another property and still keep the original property, you could be well on your way to creating a comfortable retirement scenario for yourself.

To sum up a long and complicated chapter, this information is designed to give you a basic understanding of real estate taxation and some tax-deferral methods. The goal is to make you aware of the complexity of this area so you will seek the advice of your tax expert before you make any move. When it comes to taxes, even minor mistakes could be costly. To that end, we recommend the following.

First, before you ever list a property for sale, make sure you schedule a general review meeting with your tax consultant. Review your goals, discuss all the alternatives, and get a general idea of your position. Second, when listing a property for sale make clear to your agent and in the listing contract that any transaction must be reviewed and approved by your tax consultant. And, finally, when negotiating a potential sale or exchange, include a contingency that gives you a right to have the final purchase agreement reviewed and approved by your tax consultant. This will give you an out if your tax expert advises you against the transaction.

The installment sale is another significant technique for deferring  payment of capital gains taxes. Here, sellers elect not only to  sell property but also to put up some or all of the financing needed  to make the deal work. Because the property is being sold now but  paid for later, such deals are called “installment sales.” Where taxes  are concerned, an installment sale differs from the 1031 exchange  because you actually sell the property without getting a new one in  return, but you still defer paying some or most of your capital gains  taxes. Here’s how:

Until you actually receive the profit from the sale of  your property, you don’t owe the IRS a penny. Instead,  with an installment sale you would be carrying the note  (and your profit from the sale) long term and receiving  interest-only payments from the buyer. The idea is to keep  earning a high interest on the taxes due for many years.

By doing this you would delay paying the capital gains  until the contract is complete.  The rules for qualifying for an installment sale were significantly  modified by the Installment Sales Revision Act of 1980. In the  past there were rules regarding the amount of down payment and  the number of years needed to qualify. These no longer exist. The  advantage of an installment sale now is that you are required to pay  capital gains tax only on the amount of the profit you receive in one  year. You pay the balance of the tax due as you collect the profit in  subsequent years.

It’s said that the Canadian Mounties “always get their man.” In reality, the IRS makes the Mounties look like a bunch of amateurs! No other organization in America has the ability to collect on unpaid debts like the IRS and government agencies. Not only that, they’re pretty unforgiving in terms of the penalties and interest they charge to people who don’t pay what they owe, when they owe it.

With a tax code that many accountants and financial planners struggle to master, there are hundreds of thousands of individuals who are caught off guard and unprepared by large tax bills. If you find yourself in this situation, it’s crucial to begin communicating with the IRS about eliminating this debt as soon as possible.

While no one makes it a goal of their life to owe child support or alimony, you can often find yourself owing significant amounts of money due to someone else’s decisions. Because there is often a mountain of emotions tied to these debts, they are some of the easiest to negotiate and find a compromise that works for both parties.

The legal system and states have become increasingly aggressive in pursuing people who fail to pay what they owe. Because of this increased aggressiveness, failure to pay child support or alimony can lead to garnishment of your wages and a debt that follows you even if you declare bankruptcy of move out of the country!

Like legal and medical debts, proactive negotiations can often reduce or even eliminate amounts you owe to other parties. Hence, if you find yourself in this situation, you need to put it at the top of your prioritized list.

The first major risk management tool was insurance. The insurance industry had its origins in the ancient practice of bottomry, in which the owner of a ship borrowed money for equipping the vessel and, for a definite term, pledged the ship as security. If the ship was lost in the specified voyage or period, the lender (insurer) lost his money. Clearly, a rich lender had opportunities for diversification unavailable to the owner of a single ship. Bottomry is virtually extinct today, although the maritime insurance business (which lacks the lending aspect) that replaced it is alive and well. Bottomry was a remarkable development because the risk to the lenders could still be very significant in view of the massive potential losses from a single storm or pirate, whereas the ability to diversify these risks could be limited to the commercial fleet operating out of a single port. Interest rates must have reflected these risks.

The underwriting of accidental risk became an important business in 1771, when 79 underwriters pooled their activities and created the original Members of Lloyd’s. They would appear to have intuitively understood the value of diversifying their risks.

Benjamin Franklin set up the first American insurance company in 1752, writing fire insurance. Since then, a massive global insurance industry has developed to handle a host of relatively small risks whose occurrence is statistically predictable: Health and dental insurance, life insurance, fire and flood insurance, and automobile collision and liability insurance are examples.

These instruments are familiar because they work their way into most household budgets.

When you are eligible or required to take distributions, you can opt to receive either the entire sum or periodic distributions for the Rest of your life. You can also take in-kind distributions. The taxable amount, if applicable, is based on the fair market value of the asset at the time of distribution. For example, Babette’s and Peter’s Roth IRAs each owned a 50 percent share of a flat in London. Because they were prohibited to use it, they leased it. The rent was paid to their IRAs, which also paid for all expenses. But when they turned sixty-five, they each took their share of the flat as a distribution without tax consequences. Now they are enjoying living in it themselves.

If your IRA owns assets offshore, determining the fair market value is not quite as straightforward. If you have real property, you will need to get an acceptable appraisal and have the amount converted to U.S. dollars. In the case of cash, the value of the currency being distributed must be established on the date of distribution in U.S. dollars. For required minimum distributions, the fair market value of the account is determined as of December 31 of the previous year. This information needs to be reported to the IRS, regardless of whether the IRA is a traditional or Roth. When distributing an offshore asset, timing is important because of fluctuating exchange rates, so select the day of distribution carefully.