To the Internal Revenue Service, the reasonableness of total itemized deductions depends on the taxpayer's adjusted gross income. Large deductions, which include charity and medical deductions, are more reasonable for taxpayers with large adjusted gross incomes. If a taxpayer claims larger than average itemized deductions for a given level of income, the chances of an IRS audit are increased. Data (in thousands of dollars) on adjusted gross income and the average or reasonable amount of itemized deductions follow. Adjusted Gross Income ($1,000s) Itemized Deductions ($1,000s) 22 9.6 27 9.6 32 10.1 48 11.1 65 13.5 85 19.7 120 27.5 (a) Develop a scatter diagram for these data with adjusted gross income as the independent variable. (b) Use the least squares method to develop the estimated regression equation that can be used to predict itemized deductions (in $1,000s) given the adjusted gross income (in $1,000s). (Round your numerical values to three decimal places.) ŷ = (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $47,500. (Round your answer to two decimal places.) $ thousand If this taxpayer claimed itemized deductions of $20,400, would the IRS agent's request for an audit appear justified? Explain. A. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit appears to be justified. B. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified. C. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified. D. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit appears to be justified. E. Since the predicted amount of itemized deductions is significantly less than the actual claimed itemized deductions, the agent's request for an audit appears to be justified.

To the Internal Revenue Service, the reasonableness of total itemized deductions depends on the taxpayer's adjusted gross income. Large deductions, which include charity and medical deductions, are more reasonable for taxpayers with large adjusted gross incomes. If a taxpayer claims larger than average itemized deductions for a given level of income, the chances of an IRS audit are increased. Data (in thousands of dollars) on adjusted gross income and the average or reasonable amount of itemized deductions follow. Adjusted Gross Income ($1,000s) Itemized Deductions ($1,000s) 22 9.6 27 9.6 32 10.1 48 11.1 65 13.5 85 19.7 120 27.5 (a) Develop a scatter diagram for these data with adjusted gross income as the independent variable. (b) Use the least squares method to develop the estimated regression equation that can be used to predict itemized deductions (in $1,000s) given the adjusted gross income (in $1,000s). (Round your numerical values to three decimal places.) ŷ = (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $47,500. (Round your answer to two decimal places.) $ thousand If this taxpayer claimed itemized deductions of $20,400, would the IRS agent's request for an audit appear justified? Explain. A. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit appears to be justified. B. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified. C. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified. D. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit appears to be justified. E. Since the predicted amount of itemized deductions is significantly less than the actual claimed itemized deductions, the agent's request for an audit appears to be justified.

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018

18th Edition

ISBN:9780079039897

Author:Carter

Publisher:Carter

Chapter4: Equations Of Linear Functions

Section: Chapter Questions

Problem 8SGR

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Related questions

Question

Adjusted Gross Income ($1,000s)	Itemized Deductions ($1,000s)
22	9.6
27	9.6
32	10.1
48	11.1
65	13.5
85	19.7
120	27.5

(a)

Develop a scatter diagram for these data with adjusted gross income as the independent variable.

(b)

Use the least squares method to develop the estimated regression equation that can be used to predict itemized deductions (in $1,000s) given the adjusted gross income (in $1,000s). (Round your numerical values to three decimal places.)

ŷ =

(c)

Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $47,500. (Round your answer to two decimal places.)

$ thousand

If this taxpayer claimed itemized deductions of $20,400, would the IRS agent's request for an audit appear justified? Explain.

A. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit appears to be justified.

B. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified.

C. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified.

D. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit appears to be justified.

E. Since the predicted amount of itemized deductions is significantly less than the actual claimed itemized deductions, the agent's request for an audit appears to be justified.

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