Company: RWT-PA
Filing Date: 2025-03-03
Form Type: S-3ASR
Source: 0001104659-25-019828
Chunk: 60

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: S-3ASR
Chunk 60
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.S. federal
corporate income tax rate (currently 21%) on any net income from foreclosure property, including any gain from the disposition of the
foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain
from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited
transactions described above, even if the property would otherwise constitute inventory or dealer property in the hands of the selling
REIT. If we believe we will receive any income from foreclosure property that is not qualifying income for purposes of the 75% gross
income test, we intend to elect to treat the related property as foreclosure property.

Penalty Tax

Any redetermined deductions,
excess interest, redetermined rents or redetermined TRS service income we generate will be subject to a 100% penalty tax. In general,
redetermined deductions and excess interest represent any amounts that are deducted by a TRS of ours for amounts paid to us that are
in excess of the amounts that would have been deducted based on arm’s length negotiations, redetermined rents are rents from real
property that are overstated as a result of any services furnished to any of our tenants by a TRS of ours, and redetermined TRS service
income is income of a TRS of ours that is understated as a result of services provided to us or on our behalf.

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We do not have any TRSs that
provide tenant services, and we intend to set any amounts payable to us by our TRSs at arm’s length rates.

Failure to Satisfy the Gross Income Tests.

We monitor our income and
take actions intended to keep our nonqualifying income within the limitations of the gross income tests. Although we expect these actions
will be sufficient to prevent a violation of the gross income tests, we cannot guarantee that such actions will in all cases prevent
such a violation. If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify
as a REIT for the year if we are entitled to relief under certain provisions of the Code. We generally may make use of the relief provisions
if:

| · | following                                                                                          
 our identification of the failure to meet the 75% or 95% gross income tests for any taxable        
 year, we file a schedule with the