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 ($1000s)Reasonable Amount ofItemized Deductions ($1000s)22 9.6 27 9.6 32 10.1 48 11.1 65 13.5 85 17.7 120 25.5Compute b1 and b0 (to 4 decimals).b1 b0 Complete the estimated regression equation (to 2 decimals). = + xPredict a reasonable level of total itemized deductions for a taxpayer with an adjusted gross income of $52.5 thousand (to 2 decimals). thousand dollarsWhat is the value, in dollars, of the deductions calculated in part (c) above (to the nearest whole number)?$ If this taxpayer claimed itemized deductions of $20,400, would the IRS agent's request for an audit appear justified?

First, we need to compute the slope (b1) and the y-intercept (b0) of the regression line. The…

Answered: To the Internal Revenue Service, the…

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

18th Edition

ISBN:9780079039897

Author:Carter

Publisher:Carter

Chapter10: Statistics

Section10.2: Representing Data

Problem 22PFA

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Question

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 ($1000s)	Reasonable Amount of Itemized Deductions ($1000s)
22		9.6
27		9.6
32		10.1
48		11.1
65		13.5
85		17.7
120		25.5

Compute b₁ and b₀ (to 4 decimals).

b₁
b₀

Complete the estimated regression equation (to 2 decimals).
=   +  x
Predict a reasonable level of total itemized deductions for a taxpayer with an adjusted gross income of $52.5 thousand (to 2 decimals).
thousand dollars

What is the value, in dollars, of the deductions calculated in part (c) above (to the nearest whole number)?
$

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

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