2. To the Internal Revenue Service, the reasonableness of totalitemized deductio

Question

2. To the Internal Revenue Service, the reasonableness of totalitemized deductions depends on the taxpayer’s adjusted grossincome. Large deductions, which include charity and medicaldeductions, are more reasonable for taxpayers with large adjustedgross incomes. If a taxpayer claims larger than average itemizeddeductions for a given level of income, the chances of an IRS auditare increased. Data (in thousands of dollars) on adjusted grossincome and the average or reasonable amount of itemized deductionsfollow.
Adjusted Gross Income ($1000s) ReasonableAmount 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

1. Compute b1 and b0 (to 4decimals).
2. Estimate a reasonable level of total itemized deductions for ataxpayer with an adjusted gross income of $52.5 thousand (to 2decimals).
3. What is the value, in dollars, of the deductions calculated inpart (c) above (0 decimals)?

Adjusted Gross Income ($1000s) ReasonableAmount 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

Explanation / Answer

2. To the Internal Revenue Service, the reasonableness of totalitemized deductio

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