Company: NXDT
Filing Date: 2025-04-11
Form Type: S-4
Source: 0001437749-25-011826
Chunk: 167

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-11
Form: S-4
Chunk 167
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 of our shares in the taxable year in which paid, and the distributions in clause (2) are treated as paid on December 31 of the prior taxable year. In both instances, these distributions relate to our prior taxable year for purposes of the 90% distribution requirement to the extent of our earnings and profits for such prior taxable year.

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To the extent that New NXDT distributes at least 90%, but less than 100%, of New NXDT’s REIT taxable income, as adjusted, New NXDT will have to pay tax on the undistributed amounts at the corporate U.S. federal income tax rate. New NXDT may elect to retain, rather than distribute, net long-term capital gains and pay tax on such gains. In this case, New NXDT could elect for shareholders to include their proportionate shares of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that New NXDT paid. New NXDT’s shareholders would then increase their adjusted tax basis of their shares by the difference between (a) the amounts of capital gain distributions that New NXDT designated and that such shareholders include in their taxable income, minus (b) the tax that New NXDT paid on their behalf with respect to that income.

To the extent that New NXDT has available net operating losses carried forward from prior taxable years, such losses may reduce the amount of distributions that it must make in order to comply with the REIT distribution requirements. Such losses, however, will generally not affect the character, in the hands of New NXDT’s shareholders, of any distributions that are actually made as ordinary dividends or capital gains.

Furthermore, if New NXDT fails to distribute during each calendar year at least the sum of (a) 85% of New NXDT’s ordinary income for that year, (b) 95% of New NXDT’s capital gain net income for that year and (c) any undistributed taxable income from prior periods, New NXDT would have to pay a 4% excise tax on the excess of the required distribution over the sum of the amounts actually distributed and retained amounts on which income tax is paid at the corporate level.

We anticipate that New NXDT will satisfy the annual distribution requirements. New NXDT may satisfy the 90% distribution test with taxable distributions of our shares or debt securities. The IRS has issued a revenue procedure creating a safe harbor authorizing publicly traded REITs to make elective cash/shares dividends