What types of capital gains are eligible to re-invest into a QOZ fund?

Generally, any capital gain from any source or appreciated asset sale can qualify for the QOZ fund investment treatment and deferral. This includes short-term capital gains, long-term gains, section 1231 gains, and “unrecaptured section 1250 gains”. However, recaptured 1250 gains do not qualify.

The gains need not be generated from the sale of a “like-kind” asset.

In addition, if the capital gain is generated by a sale of the appreciated asset to a “related person or party”, then the gain does not qualify for deferral via reinvestment into a QOZ fund. Related parties and persons generally include:

Immediate family attribution: Brothers and sisters (whole or half-blooded), spouses, ancestors, and lineal descendants are considered to be related parties. In-laws are not included as immediate family.
The 20% Related Party Rule: Generally, this means that the seller of the appreciated asset generating the gain cannot own more than 20% of the acquirer of the appreciated asset.