In the notice, respondent also determined to impose an addition under section 6651(a)(1) to the Chows' tax for each of their taxable years 2006 and 2008. In support of those determinations, respondent determined as follows:

Addition to Tax IRC section 6651(a)(1)

Since you did not file your return for tax years ended December 31, 2006 and December 31, 2008 within the time prescribed by law, and you did not show that not filing was due to reasonable cause, a penalty of 5 percent is added to the tax for each month or part of a month for which your return was late. * * *

In the notice, respondent further determined to impose an accuracy-related penalty under section 6662(a) on the Chows' tax for each of their taxable years 2006, 2007, and 2008. In support of those determinations, respondent determined as follows:

Accuracy-related Penalty IRC section 6662(a)

Since all or part of the underpayment of tax for the taxable year(s) ended December 31, 2006 and December 2014 Tax Ct. Memo LEXIS 50">*63 31, 2007 [and December 31, 2008] is attributable to one of more of (1) negligence or disregard of rules or regulations, (2) any substantial understatement of income tax, *61 or (3) any substantial valuation overstatement, an addition to the tax is charged as provided by section 6662(a) of the Internal Revenue Code. The penalty is twenty (20) percent of the portion of the underpayment of tax attributable to each component of this penalty. * * *

Ms. Chow bears the burden of establishing that the determinations in the notice that remain at issue are erroneous. SeeRule 142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 290 U.S. 111">115, 54 S. Ct. 8">54 S. Ct. 8, 78 L. Ed. 212">78 L. Ed. 212, 1933-2 C.B. 112 (1933). Moreover, deductions are a matter of legislative grace, and Ms. Chow bears the burden of proving entitlement to any deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79">503 U.S. 79, 503 U.S. 79">84, 112 S. Ct. 1039">112 S. Ct. 1039, 117 L. Ed. 2d 226">117 L. Ed. 2d 226 (1992). The Code and the regulations thereunder required Ms. Chow to maintain records sufficient to establish the amount of any deduction claimed. Seesec. 6001; sec. 1.6001-1(a), Income Tax Regs.

We turn first to whether Ms. Chow engaged in her 2006 gambling activities, 2007 gambling activities, and 2008 gambling activities with an actual and honest objective of making a profit.^{122014 Tax Ct. Memo LEXIS 50">*66} 2014 Tax Ct. Memo LEXIS 50">*64 Before considering that issue, we note that this is *62 not the first time that we have opined on the issue of whether Ms. Chow engaged in gambling activities with such an intent. We opined on Ms. Chow's gambling activities for taxable years 2004 and 2005 in Chow v. Commissioner, T.C. Memo. 2010-48, 2010 WL 985242">2010 WL 985242 (Chow I), aff'd, 481 Fed. Appx. 406">481 Fed. Appx. 406 (9th Cir. 2012). In Chow I, we found that Ms. Chow began gambling around 1987, that she began gambling extensively and exclusively on slot machines at Morongo Casino in 2003, and that she gambled exclusively on slot machines at that casino on 124 days in 2004 (2004 gambling activities) and 176 days in 2005 (2005 gambling activities). T.C. Memo. 2010-48, Id., 2010 WL 985242, at *1. We also found in Chow I that the Chows claimed in their respective tax returns for their taxable years 2004 and 2005 net gambling losses of $60,350 and $334,217.90, respectively. T.C. Memo. 2010-48, Id. at *2. We further found in Chow I that Ms. Chow had (1) gambling winnings of $283,072 *63 and $1,079,292 and gambling losses of $339,832 and $1,232,005 during 2004 and 2005, respectively, (2) that using a session-based analysis,¹³ she had total gambling income of $36,216 and $231,836 and total gambling losses 2014 Tax Ct. Memo LEXIS 50">*65 of $93,862 and $383,507 during those respective years. Id.

In Chow I, we analyzed Ms. Chow's 2004 gambling activities and 2005 gambling activities under section 183¹⁴ and the regulations thereunder, including section 1.183-2(b), Income Tax Regs.That regulation sets forth the following list of relevant factors to be considered in determining whether a taxpayer engaged in an activity with an actual and honest intent of making a profit: (1) the manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and the effort expended by the taxpayer in carrying on the activity; (4) the expectation that assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer's history of income or loss with respect to the activity; (7) the amount of occasional profit, if any, which is earned; (8) the financial status of the *64 taxpayer; and (9) the extent to which elements 2014 Tax Ct. Memo LEXIS 50">*67 of personal pleasure or recreation are involved.¹⁵See Chow v. Commissioner, T.C. Memo. 2010-48, 2010 WL 985242">2010 WL 985242, at *2010 WL 985242">5-*6.

On the facts established in Chow I, we held: "[W]e believe that the preponderance of the evidence favors petitioner's claim that during 2004 and 2005 she pursued gambling with a profit objective. This is a close case". T.C. Memo 2010-48, Id. at *7.

As we did in Chow I, we have analyzed Ms. Chow's 2006 gambling activities, 2007 gambling activities, and 2008 gambling activities under section 183 and the regulations thereunder, including section 1.183-2(b), Income Tax Regs. In 2014 Tax Ct. Memo LEXIS 50">*68 doing so, we bore in mind, as we did in Chow I, that although Ms. Chow's expectation of a profit need not have been reasonable, she must have had a good faith objective of making a profit. See, e.g., Dreicer v. Commissioner, 78 T.C. 642">78 T.C. 642; Dunn v. Commissioner, 70 T.C. 715">70 T.C. 715, 70 T.C. 715">720 (1978), aff'd on another issue, 615 F.2d 578">615 F.2d 578 (2d Cir. 1980); sec. 1.183-2(a), Income Tax Regs. We also had in mind, as we did in Chow I, that Ms. Chow bears the burden of proving the *65 requisite intent. See, e.g., Golanty v. Commissioner, 72 T.C. 411">72 T.C. 411, 72 T.C. 411">426 (1979), aff'd without published opinion, 647 F.2d 170">647 F.2d 170 (9th Cir. 1981); Johnson v. Commissioner, 59 T.C. 791">59 T.C. 791, 59 T.C. 791">814 (1973), aff'd, 495 F.2d 1079">495 F.2d 1079 (6th Cir. 1974); see also Dreicer v. Commissioner, 78 T.C. 642">78 T.C. 646. Finally, we bore in mind, as we did in Chow I, that we must determine whether Ms. Chow engaged in her 2006 gambling activities, 2007 gambling activities, and 2008 gambling activities with the requisite profit objective from all the facts and circumstances, see, e.g., Hulter v. Commissioner, 91 T.C. 371">91 T.C. 371, 91 T.C. 371">393 (1988); Taube v. Commissioner, 88 T.C. 464">88 T.C. 464, 88 T.C. 464">480 (1987); Golanty v. Commissioner, 72 T.C. 411">72 T.C. 426; sec. 1.183-2(a) and (b), Income Tax Regs., and that we 2014 Tax Ct. Memo LEXIS 50">*69 must give more weight to objective facts than to Ms. Chow's mere statement of her intent, see, e.g., Dreicer v. Commissioner, 78 T.C. 642">78 T.C. 645; sec. 1.183-2(a), Income Tax Regs.

The record establishes, as was the case in Chow I, that, regardless of the method used to calculate Ms. Chow's winnings and losses for each of the years at issue, Ms. Chow's losses exceeded her winnings for each of those years. The parties stipulated the winnings and the losses of Ms. Chow for each of the years at issue that are shown in the respective records that the Morongo Casino and the San Manuel Casino maintained for each of those years. Respondent used those *66 records in order to calculate Ms. Chow's winnings and losses for each of the years at issue on a session-based analysis.¹⁶

Except as discussed below, the facts that are established by the instant record are essentially the same as the facts in Chow I. The facts established here differ materially from the facts in Chow I in that in the instant case we 2014 Tax Ct. Memo LEXIS 50">*70 know that Ms. Chow continued to have substantial gambling losses in excess of her gambling winnings for each of the three years following the years at issue in Chow I, i.e., the years at issue here, 2006, 2007, and 2008. Thus, Ms. Chow sustained large net losses from her gambling activities during the five-year period 2004 through 2008.¹⁷ We are convinced by those material facts, combined with the failures of proof by Ms. Chow that we discuss below, that Ms. Chow has failed to carry her burden of establishing that she was engaged in her 2006 gambling activities, 2007 gambling activities, and 2008 gambling activities with an actual *67 and honest objective of making a profit. Ms. Chow failed to carry her burden of showing here that during the years at issue she (1) had a business plan for her gambling activities, (2) had a budget for her gambling activities, (3) maintained a separate bank account for her gambling activities, (4) attempted to change her gambling methods in an effort to make them profitable, (5) did any research in slot machine gambling about ways to improve her chances of making a profit from her gambling activities, (6) consulted anyone with expertise in slot machine gambling 2014 Tax Ct. Memo LEXIS 50">*71 about ways to improve her chances of making a profit from her gambling activities, or (7) otherwise engaged in her gambling activities in a businesslike manner. Unlike Chow I, this is not a close case.

Based upon our examination of the entire record before us, we find that Ms. Chow has failed to carry her burden of establishing that she engaged in her 2006 gambling activities, 2007 gambling activities, and 2008 gambling activities with an actual and honest objective of making a profit.

We turn next to the issues presented under sections 6651(a)(1) and 6662(a). Respondent bears the burden of production with respect to the additions to tax under section 6651(a)(1) and the accuracy-related 2014 Tax Ct. Memo LEXIS 50">*72 penalties under section 6662(a) that respondent determined in the notice. Seesec. 7491(c); Higbee v. Comm'r, 116 T.C. 438">116 T.C. 438, 116 T.C. 438">446-447 (2001). To satisfy respondent's burden of *68 production, respondent must come forward with "sufficient evidence indicating that it is appropriate to impose" those additions to tax and those penalties. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 446. Although respondent bears the burden of production with respect to the additions to tax under section 6651(a)(1) and the accuracy-related penalties under section 6662(a) that respondent determined in the notice, respondent "need not introduce evidence regarding reasonable cause * * *. * * * the taxpayer bears the burden of proof with regard to" that issue. See id.

With respect to section 6651(a)(1), that section imposes an addition to tax for failure to file timely a tax return. Respondent granted an extension of time to October 15, 2007, within which the Chows were required to file their return for their taxable year 2006 return. They did not mail to respondent their 2006 return until May 14, 2008. Respondent granted an extension of time to October 15, 2009, within which the Chows were required to file their 2014 Tax Ct. Memo LEXIS 50">*73 return for their taxable year 2008 return. They did not mail to respondent their 2008 return until February 5, 2010.

On the record before us, we find that respondent has satisfied respondent's burden of production under section 7491(c) with respect to the addition to tax *69 under section 6651(a)(1) that respondent determined for each of the Chows' taxable years 2006 and 2008.

The addition to tax under section 6651(a)(1) does not apply if the failure to file timely is due to reasonable cause, and not to willful neglect. Seesec. 6651(a)(1). At trial, petitioners failed to present any evidence to establish that the Chows' failure to file timely their 2006 return and 2008 return was due to reasonable cause, and not due to willful neglect.

On the record before us, we find that petitioners have failed to carry their burden of establishing that the Chows' failure to file timely their 2006 return and 2008 return was due to reasonable cause, and not due to willful neglect.

Based upon our examination of the entire record before us, we find that petitioners have failed to carry their burden of establishing that they are not liable for an addition to tax under section 6651(a)(1) for each of their taxable 2014 Tax Ct. Memo LEXIS 50">*74 years 2006 and 2008.

With respect to section 6662(a), that section imposes an accuracy-related penalty of 20 percent of the underpayment to which section 6662 applies. Section 6662 applies to the portion of any underpayment which is attributable to, inter alia, negligence or disregard of rules or regulations, sec. 6662(b)(1), or a substantial understatement of tax, sec. 6662(b)(2).

*70 The term "negligence" in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code. Sec. 6662(c). Negligence has also been defined as a failure to do what a reasonable person would do under the circumstances. See Leuhsler v. Comm'r, 963 F.2d 907">963 F.2d 907, 963 F.2d 907">910 (6th Cir. 1992), aff'gT.C. Memo. 1991-179; Antonides v. Commissioner, 91 T.C. 686">91 T.C. 686, 91 T.C. 686">699 (1988), aff'd, 893 F.2d 656">893 F.2d 656 (4th Cir. 1990). The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c).

The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion. Sec. 6664(c)(1). The determination whether the taxpayer acted with reasonable 2014 Tax Ct. Memo LEXIS 50">*75 cause and in good faith depends upon the pertinent facts and circumstances, including the taxpayer's efforts to assess such taxpayer's proper tax liability, the knowledge and experience of the taxpayer, and the reliance on the advice of a professional, such as an accountant. Sec. 1.6664-4(b)(1), Income Tax Regs.

The Chows' underpayment for each of the years at issue is attributable in large part to their claimed gambling losses for each such year.¹⁸ They reduced *71 their nongambling income by those claimed losses in contravention of section 165(d).^{192014 Tax Ct. Memo LEXIS 50">*76} In doing so, they intentionally disregarded the law and were negligent.

On the record before us, we find that respondent has met respondent's burden of production under section 7491(c) with respect to the accuracy-related penalty under section 6662(a) that respondent determined for each of the years at issue.

On the record before us, we find that petitioners have failed to carry their burden of showing that the Chows were not negligent and did not disregard rules or regulations, or otherwise did what a reasonable person would do, with respect to the underpayment for each of the years at issue.

On the record before us, we find that petitioners have failed to carry their burden of showing that there was reasonable cause for, and that the Chows acted *72 in good faith with respect to, the underpayment for each of the years at issue. Seesec. 6664(c)(1).

Based upon our examination of the entire record before us, we find that petitioners have failed to carry their burden of establishing that the Chows are not liable for each of the years at issue for the 2014 Tax Ct. Memo LEXIS 50">*77 accuracy-related penalty under section 6662(a).

We have considered all of the parties' respective contentions and arguments that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot.

To reflect the foregoing and concessions of the parties,

Decision will be entered under Rule 155.