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

A capital gain occurs when you sell or dispose of a capital asset for more than its original purchase price or cost basis. It represents the profit made on the sale of an asset. Generally, a capital gain from any source can qualify for the QOZ fund investment treatment and deferral. This includes short-term capital gains (held for one year or less; taxed as ordinary income), long-term gains (held for longer than a year, taxed at lower rates depending on income), Section 1231 gains, and unrecaptured Section 1250 gains (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.

Examples of capital assets include:

Real estate
Stocks, bonds, mutual funds, ETFs
Cryptocurrency
Cars, art, jewelry, collectibles