Restaurant closings

[SoonerDave]

Just seems like there are about 2x more restaurants in place than the MSA can actually support.

Agreed. I think it's inevitable more closures are coming.

[jedicurt]

Just seems like there are about 2x more restaurants in place than the MSA can actually support.

or bad business owners. lets go back and look at PDQ... they didn't just close their stores in OKC metro... they even closed the ones in DFW... so that closing had nothing to do with OKC.

[mugofbeer]

Just seems like there are about 2x more restaurants in place than the MSA can actually support.

There are FAR more fast food outlets per capita in OKC than Denver.

[chuck5815]

There are FAR more fast food outlets per capita in OKC than Denver.

Well, that definitely makes sense—but OKC has far more Fatties per capita than Denver too, and the Fast Food guys are well aware of that fact. But the bigger point is that an outsize share of folks with capital think they can make a restaurant work in OKC. One of my neighbors is a good example. Guy is a doctor with a very successful practice, and he decides to open a new cajun restaurant in the city. I told him, “Hey, dude, you’re going to lose your ass on this deal.” And he opened it anyway. From what I hear, business has been absolutely terrible and they aren’t even close to making the thing cash flow. They even resorted to Groupons, it is so bad. So yea, I think there are a large number of wealthy folks seeking to diversify away from an expensive stock market by lighting big barrels of money on fire in the restaurant business. A bunch of regular Hal Smiths, if you will.

[SoonerDave]

Some folks with *considerable* disposable operate a business like a restaurant purposely at a loss for several years as a tax shelter. I believe you can operate a business at a loss for a certain number of years and write off some of the loss (within constraints). Most folks doing this will operate the business for the time allowed, and when the exemption runs out, they close it down. I think Barry Switzer put a bunch of money into (at least) two different restaurants that, after a few years, quietly failed and then disappeared.

[CloudDeckMedia]

Some folks with *considerable* disposable operate a business like a restaurant purposely at a loss for several years as a tax shelter. I believe you can operate a business at a loss for a certain number of years and write off some of the loss (within constraints). Most folks doing this will operate the business for the time allowed, and when the exemption runs out, they close it down. I think Barry Switzer put a bunch of money into (at least) two different restaurants that, after a few years, quietly failed and then disappeared.

You don’t intentionally lose money in business so you can take the tax loss. Doesn’t work that way.

[AP]

lmao

[jedicurt]

You don’t intentionally lose money in business so you can take the tax loss. Doesn’t work that way.

you don't work with people who own multiple businesses a lot then, do you?

[SoonerDave]

You don’t intentionally lose money in business so you can take the tax loss. Doesn’t work that way.

LOL I guess you live in Fantasy land. Whatever, dude. I know better. Have a good one.

[SoonerDave]

you don't work with people who own multiple businesses a lot then, do you?

LOL spot-on

I was naive about businesses not deliberately losing money I was kinda laughed at once and then someone explained to me how some rich folks hide some of their income, like doctors letting spouses run nonsense side-businesses for a few years. I will say that apparently the IRS cracked down on some of this a few years ago, putting limits on some losses, but the practice is still apparently pretty prevalent. I don't have that kind of cash, so it doesn't affect me LOLOL 😁

[jerrywall]

LOL spot-on

I was naive about businesses not deliberately losing money I was kinda laughed at once and then someone explained to me how some rich folks hide some of their income, like doctors letting spouses run nonsense side-businesses for a few years. I will say that apparently the IRS cracked down on some of this a few years ago, putting limits on some losses, but the practice is still apparently pretty prevalent. I don't have that kind of cash, so it doesn't affect me LOLOL 😁

Eh, it's a lot more complex than this... it doesn't make sense for someone to intentionally lose $1 to save $.35. Now, it might make sense if you're able to put a lot of non deductible expenses under one of the businesses and then declare a loss. However, that's technically illegal (although it does happen). You can't operate a business in order to declare a loss. The IRS does look at intent. https://www.irs.gov/pub/irs-news/fs-07-18.pdf

However, having a spouse open up a side home business to enable for additional deductions is one thing. Opening up a business and intentionally sinking actual money (non virtual paper losses) makes no financial sense. You can only take a loss so many times before the IRS considers you a hobby. And you still had to take a loss.

So for example, I spend a lot on photography equipment, and do a lot of photography. I could establish a business and write off my equipment. So making a loss there would save me money (although it would increase the chance for an audit, and wouldn't technically be legal). However, if I started dumping real expenses in there like a storefront and such, then it wouldn't make financial sense. Even in the former case, it's only offsetting a percentage of money I was going to spend anyways. It wouldn't make financial sense to get into photography as a way to lose money and save on taxes. This is similar to people who claim that those who make charitable donations are just doing it to "save" money on taxes. Yes, you'd lower your tax bill, but your total out of pocket is significantly higher.


None of this is meant to include those who operate business to launder money. I know of a few restaurants/bars in OKC (although most of them are gone now) that operated only as money laundering operations.

[Rover]

LOL I guess you live in Fantasy land. Whatever, dude. I know better. Have a good one.

You would have to be really stupid or doing something illegal to purposely operate at a continual loss in order to take that loss to save taxes. What many people think of, but don't understand, is that you may be able to buy an ongoing concern that has accumulated losses that can be carried back, forward, or used currently, in order to offset current gains. It can be complicated and the seller is still in a loss situation. The idea that anyone trades a loss for a significantly less tax savings is nuts.

[SoonerDave]

You would have to be really stupid or doing something illegal to purposely operate at a continual loss in order to take that loss to save taxes. What many people think of, but don't understand, is that you may be able to buy an ongoing concern that has accumulated losses that can be carried back, forward, or used currently, in order to offset current gains. It can be complicated and the seller is still in a loss situation. The idea that anyone trades a loss for a significantly less tax savings is nuts.

I don't remember the details, but it was explained to me very matter-of-factly as a tax dodge years ago and something that was fairly routinely done. As I said, I don't travel in those financial circles so I can't vet the accuracy of it, maybe it was total BS, but I'm also sure they didn't explain every subtlety of detail.

Anyway, I'll leave this discussion to others who know more about it. Didn't intend to derail the topic off restaurant closures.

[Jeepnokc]

I will just say that there are businesses out there that generate losses that aren't necessarily losses. Let's keep it simple as I just came from office party and having to focus on keyboard. Say I am a hobbyist coin collector and I spend 5k per year visiting trade shows in Vegas because I am serous about my hobby. I spend another 10 k per year buying stuff for my collection. I am spending 15k per year on my hobby. I open a coin shop and have 50k in sales but have 50 k in salary, rent, expenses. I broke even or maybe lost a little. But throw in 15 in other expenses that I was already spending on my hobby which is now a business (or social bills drinking or eating out if you own bar) and all of the sudden you have a net loss on your business far greater than what you actually spent on the business.

Call me crazy or stupid but I know my tax bill is lighter due to certain restaurant investments and the result is a net gain. (and I use an hard nose CPA who cuts me no slack because I am way too pretty for jail)

[Rover]

I will just say that there are businesses out there that generate losses that aren't necessarily losses. Let's keep it simple as I just came from office party and having to focus on keyboard. Say I am a hobbyist coin collector and I spend 5k per year visiting trade shows in Vegas because I am serous about my hobby. I spend another 10 k per year buying stuff for my collection. I am spending 15k per year on my hobby. I open a coin shop and have 50k in sales but have 50 k in salary, rent, expenses. I broke even or maybe lost a little. But throw in 15 in other expenses that I was already spending on my hobby which is now a business (or social bills drinking or eating out if you own bar) and all of the sudden you have a net loss on your business far greater than what you actually spent on the business.

Call me crazy or stupid but I know my tax bill is lighter due to certain restaurant investments and the result is a net gain. (and I use an hard nose CPA who cuts me no slack because I am way too pretty for jail)

Of course you can do that, and people do. If you aren't particularly concerned about the ethics of it, or even the risk of having non-legit personal expenses discredited in audit, it may work... for awhile. But the IRS has been rightfully cracking down on "hobby" businesses used to cover personal expenses as business expenses. If anyone tells you they will spend $250,000 to set up a business so they can write off $20,000 a year in illegit expenses, maybe saving them $5-6,000 in taxes, then they are full of it.

[CloudDeckMedia]

you don't work with people who own multiple businesses a lot then, do you?

I DO own multiple businesses, and have over the years. Please share the math showing that a $1.00 loss in EBIDTA results in more than $1.00 in tax savings, and that it results in MORE money in your pocket at the end of the day, not less. If you're talking about ACRS, bonus depreciation and the like, that's different and not consistent with the broad sentiment, "rich people lose money because of the tax writeoff."

[CloudDeckMedia]

You would have to be really stupid or doing something illegal to purposely operate at a continual loss in order to take that loss to save taxes. What many people think of, but don't understand, is that you may be able to buy an ongoing concern that has accumulated losses that can be carried back, forward, or used currently, in order to offset current gains. It can be complicated and the seller is still in a loss situation. The idea that anyone trades a loss for a significantly less tax savings is nuts.

Yes to this. I owned an LLC which owned a single asset which had been almost fully depreciated, and a buyer made an offer. If I sold her the asset, the depreciation would be recaptured and I'd have a tax liability, but if I sold her the LLC, the tax liability would pass to her and I wouldn't owe a penny. I offered the latter, which she smilingly declined, and we closed the deal.

[jedicurt]

I DO own multiple businesses, and have over the years. Please share the math showing that a $1.00 loss in EBIDTA results in more than $1.00 in tax savings, and that it results in MORE money in your pocket at the end of the day, not less. If you're talking about ACRS, bonus depreciation and the like, that's different and not consistent with the broad sentiment, "rich people lose money because of the tax writeoff."

it's about offsetting your taxable income. if second business is making little to no revenue, or even a loss, then your expenses, as well as deductions for the costs of assets, can be used to offset your other taxable income. typically this is done to try and drop someone into a lower tax bracket, and thus results in paying less in taxes on that taxable income. a lot of times the money that is used to run and start the business may have been taxed at normal income rate, rather than capital gain rate depending upon it's source, and thus the loss of that money could actually end with a positive net amount when all taxes are figured due to lowering the incoming tax bracket back down over the course of a few years when this money is removed from markets or investments.

one of the best ways of looking at it is that the long term capital gains tax is paid on a rate based upon your tax bracket, and so if someone is able to lower their tax bracket, they might be able to free up much more in investments at a reduced capital gains rate, and thus come out very much in the positive.

[Rover]

it's about offsetting your taxable income. if second business is making little to no revenue, or even a loss, then your expenses, as well as deductions for the costs of assets, can be used to offset your other taxable income. typically this is done to try and drop someone into a lower tax bracket, and thus results in paying less in taxes on that taxable income. a lot of times the money that is used to run and start the business may have been taxed at normal income rate, rather than capital gain rate depending upon it's source, and thus the loss of that money could actually end with a positive net amount when all taxes are figured due to lowering the incoming tax bracket back down over the course of a few years when this money is removed from markets or investments.

one of the best ways of looking at it is that the long term capital gains tax is paid on a rate based upon your tax bracket, and so if someone is able to lower their tax bracket, they might be able to free up much more in investments at a reduced capital gains rate, and thus come out very much in the positive.

Accelerated and bonus depreciation for certain assets may offset current income, but if recovered may be subject to tax recovery and penalties, especially if overstated. And, using accelerated depreciation for front-end savings reduces depreciation expenses after 5 and/or 15 years. The IRS also looks hard at schemes to turn current income into capital gains.

Also, you have to be careful to not confuse losses you can take as active vs passive.

Running a business at a loss is different than using other tax strategies. You still don't make money by losing money and spending $1 to make something less than $1.

[jedicurt]

yes, but remember that a lot of people only look at taxes from one year to the next, especially when they are making brash and quick decisions about current or next year. yes, over several years it could actually end up making their tax burden significantly worse. but that is also why so many people end up with massive tax bills and sometimes even tax evasion charges. it isn't that they just didn't pay taxes... it is that they did things to avoid paying a bunch of taxes now, in favor of short term gain, as opposed to long term strategy.

[jedicurt]

look back, i never said they should do it, or that it was smart in the long term... i just mentioned that it does happen and it happens a lot.

[barrettd]

How about a different thread for this argument?

[Pete]

3sixty is closing New Years Eve.

[Pete]

Abuelitas in Moore (from their FB page):

Friends and Family the time has come for us to let you know that this is the last weekend we will be open for business in our Moore Location. December 29th will be our last day, we have appreciated your company, business, laughter and even love. To us you are all family! If you have time this weekend please come by and say goodbye to all of us and let us see your faces one last time!

[Teo9969]

3sixty is closing New Years Eve.

Booo...I wanted to get back there at some point, but I don't suppose I'll miss it too much.

Surely that space is going to stay shuttered for a while now.