Alamo Broadcasting Co. v. Commissioner
A 1950 Tax Court case allocating a lump-sum radio-equipment purchase, characterizing a diesel-generator loss, and depreciating leasehold improvements over the lease plus renewal. It is historical useful-life law, not a structural-component or intangibles case.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- The case is about lump-sum allocation, a blocked-export loss, and pre-MACRS leasehold lives — not MACRS classes.
- It is not an intangibles decision and not a building-component decision.
- Do not use Alamo’s four-year transmitter life or lease-plus-renewal rule for property placed in service today.
- Educational information, not tax advice.
Case record
- Court
- U.S. Tax Court
- Citation
- 15 T.C. 534 (1950)
- Decision date
- 1950-10-20
- Facts
- Alamo Broadcasting operated KABC in San Antonio. Wartime restrictions made a 50,000-watt transmitter unavailable in the United States, so Alamo bought Mexican station XENT’s equipment for a lump sum. Total cost found by the court was $196,501.15. Mexico allowed export of the transmitter but, after a presidential decree, not the 300-kilowatt diesel power plant. Alamo sold the diesel in Mexico in July 1946 for $4,125. It also built a transmitter house and towers on a 10-year lease with a 15-year renewal option. The Commissioner denied the diesel loss, or alternatively treated it as capital, and lengthened leasehold amortization to include the renewal period.
- Issue
- What portion of the lump-sum price belonged to the diesel; was the loss on its sale a §117(j) business-property loss; and over what period should the transmitter and the leasehold improvements be depreciated?
- Holding
- The court allocated $45,240 of cost to the diesel and associated parts and allowed a $41,115 loss as a loss on property used in the trade or business (old §117(j)). “Used in the trade or business” included property bought for future use even though Mexico later blocked export. Machinery and equipment, including the transmitter, were given a four-year life. The brick building was recovered over 285 months from May 1, 1946 (lease plus renewal). Steel towers had a 15-year life and other antenna equipment a 12-year life — useful life if shorter than the combined lease.
- Reasoning
- Judge Arundell rejected the Commissioner’s salvage theory. Testimony showed Alamo intended to use the diesel for primary or auxiliary power until legal and caretaking costs forced a sale. A lump-sum price with no asset-by-asset values was broken apart using fair-market-value percentages, which the court adjusted. Leasehold improvements were recovered over the period the taxpayer would use them, including a realistic renewal, or over economic life if shorter, under the then-applicable regulations.
- Relevance to cost segregation
- Only marginal for cost segregation: an early example of allocating a lump-sum purchase among mixed assets. MACRS, salvage-is-zero, and qualified improvement property have replaced these useful-life and leasehold rules. The case is not about intangibles, broadcasting licenses, or structural components.
Alamo Broadcasting Co. v. Commissioner, 15 T.C. 534 (1950), is a radio-equipment case from the useful-life era. Alamo paid one price for a Mexican station’s plant, got the transmitter across the border, and never got the diesel. The fight was how to split the price, how to characterize the diesel loss, and how fast to write off a new transmitter site on leased land.
The court found that Alamo had bought the diesel to use it, not as scrap attached to a transmitter purchase. Yellow Cab Co. of Pittsburgh v. Driscoll appears in the opinion only as support for the idea that property devoted to a business can still be “used in the trade or business” when events later prevent that use. That citation is one reason a later inventory caption named Yellow Cab. It is not a cost-segregation holding. The Yellow Cab page in this library separates 35 T.C. 791 (excess profits tax) from Yellow Cab Co. of Pittsburgh v. Driscoll, 24 F. Supp. 993 (idle cabs).
Allocation method is the only piece that still rhymes with modern acquisition work. The court accepted a fair-market-value percentage split of a lump sum, then adjusted the percentages on the evidence. That is ancestor language for breaking a contract price among assets. It is not §1060, it is not Form 8594, and it does not authorize a later study to rewrite a written allocation the way Peco Foods forbade.
Recovery periods in the opinion are historical. A four-year transmitter life, a 15-year tower life, and amortization of a brick building over the lease plus a 15-year option come from 1940s useful-life practice and Regulations 111. Under MACRS, salvage is ignored, class lives come from §168 and Rev. Proc. 87-56, and interior building work may be qualified improvement property — a different statute. Flag F-15 is the reason this page stays labeled history.
This page is educational information, not tax advice. Keep it as a caution against over-reading an old caption. Super Intelligence is not described here as an operational product, and Alamo does not classify a wall or an HVAC unit.
What the caption does not mean
Alamo is not a case about broadcasting intangibles, licenses, or goodwill. It is not a structural-component case. The diesel issue is a blocked-export loss. The leasehold issue is old useful-life amortization.
Current law
For a lump-sum building purchase, start with §1060 if it is an applicable asset acquisition, and with Peco Foods if the parties already signed a written schedule. For interior work placed in service today, start with qualified improvement property and MACRS conventions, not Alamo’s four-year transmitter life.
How a study should use the case
Keep Alamo on the historical shelf (flag F-15). The useful-life holding — a four-year transmitter, a 15-year tower, and a brick building recovered over the lease plus a 15-year renewal — is 1950 law. Salvage, class lives, and qualified improvement property are different statutes now.
The only modern echo is method: a lump-sum price can be broken apart on evidence of relative value. That echo does not authorize rewriting a signed §1060 schedule. Peco Foods is the later, closer authority on a written allocation, and it has no named inventory URL (flag F-21).
Educational information, not tax advice. Yellow Cab appears in the opinion only as support for “used in the trade or business.” The Yellow Cab page names Driscoll for that point and 35 T.C. 791 for the later excess-profits case.
Verification. Verified from the HallApproved text of 15 T.C. 534 (promulgated October 20, 1950; Judge Arundell; Docket No. 22362). Labeled historical per flag F-15.