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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 12.5 85 16.7 120 24.5 (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). (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500, If this taxpayer claimed itemized deductions of $20,300, would the IRS agent's request for an audit appear justified? Explain.

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 12.5 85 16.7 120 24.5 (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). (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500, If this taxpayer claimed itemized deductions of $20,300, would the IRS agent's request for an audit appear justified? Explain.

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
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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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 12.5 85 16.7 120 24.5 (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). (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500. If this taxpayer claimed itemized deductions of $20,300, would the IRS agent's request for an audit appear justified? Explain. Click here to begin!
Transcribed Image Text: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 12.5 85 16.7 120 24.5 (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). (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500. If this taxpayer claimed itemized deductions of $20,300, would the IRS agent's request for an audit appear justified? Explain. Click here to begin!
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