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 25.5
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.)
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(c)
Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500. (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.
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.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. 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.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.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.