Company: RWT-PA
Filing Date: 2025-03-03
Form Type: S-3ASR
Source: 0001104659-25-019828
Chunk: 51

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: S-3ASR
Chunk 51
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 available to the shareholder; |

| · | in                                                                                       
 the case of a shareholder that is a REIT, a regulated investment company, or a RIC, or a 
 common trust fund or other pass-through entity, is considered excess inclusion income of 
 such entity;                                                                             |

| · | is                                                                                             
 subject to tax as unrelated business taxable income in the hands of most types of shareholders 
 that are otherwise generally exempt from U.S. federal income tax;                              |

| · | results                                                                                     
 in the application of U.S. federal income tax withholding at the maximum rate (30%),        
 without reduction for any otherwise applicable income tax treaty or other exemption, to the 
 extent allocable to most types of non-U.S. shareholders; and                                |

| · | is                                                                                          
 taxable at the U.S. federal corporate income tax rate, currently 21%, to the REIT, rather   
 than its shareholders, to the extent allocable to the REIT’s shares held in record          
 name by disqualified organizations (generally, tax-exempt entities not subject to unrelated 
 business income tax, including governmental organizations).                                 |

The manner in which excess
inclusion income is calculated, or would be allocated to our stockholders, including allocations among shares of different classes of
stock, is not clear under current law. As required by IRS guidance, we intend to make such determinations using a reasonable method.

Tax-exempt investors, RIC
or REIT investors, non-U.S. investors and taxpayers with net operating losses should carefully consider the tax consequences described
above, and are urged to consult their tax advisors with respect to the U.S. federal income tax consequences of an investment in
our capital stock.

If a subsidiary partnership
of ours that we do not wholly own, directly or through one or more disregarded entities, were a TMP, the foregoing rules would not apply.
Rather, the partnership that is a TMP would be treated as a corporation for U.S. federal income tax purposes, and potentially would
be subject to U.S. federal corporate income tax or withholding tax. In addition, this characterization would alter our income and
asset test calculations, and could adversely affect our compliance with those requirements. We intend to monitor the structure of any
TMPs in which we will have an interest to ensure that they will not adversely affect our qualification as a REIT.

Income Tests

We must satisfy two gross
income requirements annually to maintain our qualification as a REIT. First, in each taxable year we must derive directly or