Final answer:
The claim regarding prorating asset costs is false; instead, asset costs are capitalized and depreciated over their useful life.
Step-by-step explanation:
The statement that the Tax Court and the IRS took the position that the cost of an asset that will expire or be consumed by the end of the tax year following the year of payment must be prorated across the years is false. Asset costs should be capitalized and expensed over the useful life of the asset. The method of proration would depend on the asset's depreciation method and useful life, not merely its existence over two tax years.
Income taxes paid are on the earnings of the year under consideration. These taxes serve to fund government functions, based on principles including the benefit principle and the ability-to-pay principle. As everyone's situation is different, there are exceptions to the general tax rules, which can impact the final tax liability.