Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 15.5 85 19.7 120 23.5 (a) Develop a scatter diagram for these data with adjusted gross income as the independent variable. 30 30 30 30 25 25 20 20 20 15 Itemized Deductions ($1,000s) 15 15 15 1 10 10 10 10 5 5 5 0 20 40 60 80 100 120 140 Adjusted Gross Income ($1,000s) 0 20 40 60 80 100 120 140 0 20 40 60 80 100 120 140 0 20 40 60 80 100 120 140 Adjusted Gross Income $1,000s) Adjusted Gross Income ($1,000s) Adjusted Gross Income ($1,000s) Ci (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.) = | 4.712+0.17lx X (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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started