On April 11, 2016, the Department assessed the Taxpayer for personal income tax, penalty and interest for the tax periods from January 1, 2011 through December 31, 2013. On May 2, 2016, the Taxpayer filed a protest. The Taxpayer and her husband owned approximately 1300 acres of land in Quay County, which they purchased in 2009. The Taxpayer’s husband earned a substantial income from work unrelated to the land and cattle. The Taxpayer’s husband retired, became ill, and passed away prior to the assessment. The Taxpayer made improvements to the land, which included fencing and drilling wells, and bought three cows to begin a cattle-breeding operation. The Taxpayer’s herd now has 19 pairs of heifers and calves, and the Taxpayer intends to continue breeding until the herd is 50 head. The Taxpayer’s cattle-breeding operation and land improvements have generated substantial losses, which the Taxpayer claimed against her income. The Taxpayer did not provide any evidence to show that the operation has made a profit. The issue to be decided at hearing is whether the Taxpayer is liable for the assessment. The parties agree that the determination hinges on whether the Taxpayer’s cattle operation should be considered as a for-profit business or not under 26 USCS Section 183. There is a federal deduction allowed for expenses occurred when engaging in any trade or business, but this deduction is disallowed when the activity is not for-profit. The federal regulations list nine factors to aid in determining whether an activity is for-profit or not. In examining each of these factors, the Hearing Officer found that some factors weighed against finding that the activity is for-profit, while others weighted for it, but in the end seven of the nine factors indicated that the activity engaged in by the Taxpayer was not for-profit and the deductions were correctly disallowed by the Department. The Taxpayer’s protest was denied.