Final answer:
A qualified trade or business for the qualified business income deduction excludes a 'Specified Service Trade or Business' as well as 'Investment Holding Companies'. These are businesses where services are performed based on the skill or reputation of the owners or employees, or those primarily holding investments, respectively.
Step-by-step explanation:
For qualified business income deduction purposes, one of the key things to understand is what constitutes a qualified trade or business under the tax code, specifically section 199A. The qualified business income (QBI) deduction allows eligible self-employed and small business owners to deduct up to 20% of their qualified business income on their taxes. However, there are exclusions to what type of businesses can qualify for this deduction.
While sole proprietorships, partnerships, LLCs, S corporations, and other entities generally qualify for the QBI deduction, there's an exception for what's categorized as Specified Service Trades or Businesses (SSTBs). SSTBs include businesses offering services such as law, accounting, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
On the other hand, investment holding companies don't generally conduct a trade or business within the conventional meaning under the Internal Revenue Code and consequently are also excluded from the QBI deduction. For purposes of this question, the correct answer is that a qualified trade or business for the QBI deduction does not include a Specified Service Trade or Business (C) or an Investment holding company (D).
Final answer: For the qualified business income deduction, a qualified trade or business is any trade or business other than a Specified Service Trade or Business (C) or an Investment Holding Company (D).