1. To the internal revenue service, the reasonableness of total itemized deductions depended on the taxpayer's adjusted gross income. Large deductions which include charity and medical deductions are more reasonable for taxes payers with large adjusted gross incomes. If taxes payer claims larger than average itemized deductions for a given level of income, the chances of the irs audit are increased. Data (in thousands of dollars) on adjusted gross income and the average or reasonable amount of itemized deductions follow.
a. Develop a scatter diagram for these data with adjusted gross income as the independent variable.
b. use the least squared method to develop the estimated regression equation.
c. Predict the reasonable level of total itemized deductions for a taxes payer with an adjusted gross income of 52,500. If this taxpayer claimed itemized deductions of 20,400 would the IRS agent's requested for an audit appeared justified? Explain