What effect does the IRS adjustment have on Paula's gross income?

The correct answer indicates that Paula's gross income will increase by $100,000 due to the IRS adjustment. This scenario typically arises in the context of an adjustment that the IRS has made concerning income reporting or deductions that were previously claimed. When the IRS makes a determination that results in additional taxable income, it directly impacts the gross income figure.

In this case, assuming that the $100,000 adjustment is classified as taxable income, it must be added to Paula's gross income calculation. Gross income includes all income received in the form of money, goods, property, and services that are not exempt from tax. Therefore, any increase resulting from IRS adjustments must be accurately reflected in gross income.

By stating that her gross income will increase, the choice accurately describes the direct consequence of the IRS's action, whereas the other options address different scenarios that do not apply to Paula's situation regarding the impact of the adjustment.