Company: RWT-PA
Filing Date: 2025-01-15
Form Type: 424B5
Source: 0001104659-25-003632
Chunk: 121

Company: REDWOOD TRUST INC
Filing Date: 2025-01-15
Form: 424B5
Chunk 121
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, if the REIT distributed taxable income that it retained
and paid tax on in the prior taxable year). Capital gain dividends will only be eligible for the rates described above to the extent
that they are properly designated by the REIT as “capital gain dividends.” U.S. Holders that are corporations may be required
to treat up to 20% of some capital gain dividends as ordinary income. In addition, non-corporate U.S. Holders, including individuals,
generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend
income, for taxable years beginning before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for
purposes of the 3.8% Medicare tax), subject to certain holding period requirements and other limitations.

<div align='center'>44</div>

Taxation of Tax-Exempt Holders of Our Capital Stock

Dividend income from us and
gain arising upon a sale of shares of our capital stock generally should not be unrelated business taxable income, or UBTI, to a tax-exempt
holder, except as described below. This income or gain will be UBTI, however, to the extent a tax-exempt holder holds its shares as “debt-financed
property” within the meaning of the Code or if we hold an asset that gives rise to “excess inclusion income.” See “Material
U.S. Federal Income Tax Considerations—Taxation of the Company—Excess Inclusion Income.” Generally, “debt-financed
property” is property the acquisition or holding of which was financed through a borrowing by the tax-exempt holder.

For tax-exempt holders that
are social clubs, voluntary employee benefit associations or supplemental unemployment benefit trusts exempt from U.S. federal income
taxation under Sections 501(c)(7), (c)(9) or (c)(17) of the Code, respectively, income from an investment in our capital stock will
constitute UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for specific
purposes so as to offset the income generated by its investment in our stock. These prospective investors should consult their tax advisors
concerning these “set aside” and reserve requirements.

Notwithstanding the above,
however, a portion of the dividends paid by a “pension-held REIT” may be treated as UBTI