Intentionally defective non-grantor trust is usually best.
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Is there a difference if the transfer of the QOF interest is to a trust or an individual?
What is most beneficial for an investor?
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This will depend on a variety of factors, including the legal form of the QOF, e.g., LLC /partnership/C corp or S corp. Please keep in mind that the ownership will generally need to be in the name of the taxpayer that reported the original capital gain. If the ownership is changed this can create a taxable disposition event.
I think that this question needs more detail to get at what you are trying to accomplish. In general, the holder of a QOF interest must be the person with the capital gain, and a transfer of the interest to someone else by gift would accelerate the gain deferral. So, if a person has the gain, and you set up a trust that accomplishes a gift to someone else, you would lose the benefit of the gain deferral. But perhaps you are asking a different question.
Gifts made of a QOF interest are inclusion events and negatively impact the QOZ tax benefits. However, a transfer to a grantor trust is OK, as it is treated as a disregarded entity. Thus, the owner of the investment is still the same investor. If the investor dies, then a transfer to a trust or individual after death generally is not an issue. The rule about gifts may change, however, in the final regulations.
Any transfer to an irrevocable trust or an individual will result in immediate recognition of deferred income. Transfer to living trust or any other entity that does not change proportional ownership will not result in inclusion. This can get tricky, so consult your tax professional before making any transfers or gifts.
Some information to clarify the question is needed. If the interest in the QOF is transferred, there might be a inclusion event for the deferred gain. If the transfer is to a grantor trust, there will be no triggering event.
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