The income earned by a specified investment business is not eligible for the small business deduction. This makes it important to know what kinds of businesses are specified investment businesses.
MEANING OF SPECIFIED INVESTMENT BUSINESS
A specified investment business is a business carried on by a corporation, not an individual. It is a business, other than the business of leasing real property, the principal purpose of which is to earn income from property. Income from property includes, but is not limited to interest, dividend, rental, or royalty income.
There are a few more exception
the most important one of which is the number-of-employees exception. Even if the principal purpose of a business is to earn income from property, where the corporation employs more than 5 full-time employees (directly or indirectly through associated corporations) in the business for the entire year, the business will not be a specified investment business.
