Company: RWT-PA
Filing Date: 2025-08-22
Form Type: 424B5
Source: 0001104659-25-081925
Chunk: 96

Company: REDWOOD TRUST INC
Filing Date: 2025-08-22
Form: 424B5
Chunk 96
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 of additional interest on the notes. We intend to take the position that these contingencies should not cause the notes to be treated as contingent payment debt instruments under the applicable Treasury Regulations. Assuming such position is respected by the IRS, a U.S. Holder would be required to include in income the amount of any such additional payments at the time such payments are received or accrued in accordance with such U.S. Holder’s method of accounting for U.S. federal income tax purposes and, upon a conversion or sale or other disposition of the notes, a portion of the proceeds may be deemed to be attributable to additional

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interest. Our position is binding on a U.S. Holder, unless the holder discloses in the proper manner to the IRS that it is taking a different position. Our position that the notes are not contingent payment debt instruments is not, however, binding on the IRS. If the IRS successfully challenged our position, and the notes were treated as contingent payment debt instruments, a U.S. Holder would be required to accrue interest income, regardless of the U.S. Holder’s method of tax accounting, and to treat as ordinary income, rather than capital gain, any gain recognized on a sale, exchange, retirement or redemption of a note (including all gain realized upon conversion, even if the U.S. Holder receives shares of common stock). This discussion assumes that the notes will not be considered contingent payment debt instruments and that additional interest will not become payable. U.S. Holders are urged to consult their tax advisors regarding the potential application to the notes of the contingent payment debt instrument rules and the consequences thereof.

Sale, Exchange, Redemption or Other Taxable Disposition

Except as provided below under “— Conversion of Notes,” a U.S. Holder will recognize gain or loss upon the sale, exchange, redemption or other taxable disposition of a note. The amount of such gain or loss will generally be equal to the difference between the amount received for the note in cash or other property valued at fair market value (less amounts attributable to any accrued but unpaid interest, which, except to the extent attributable to pre-acquisition accrued interest, will be taxable as interest to the extent not previously included in income) and such U.S. Holder’s adjusted tax basis in the note. A U.S. Holder’s adjusted tax basis in a note generally will be equal to the amount that the U.S. Holder paid for the note, excluding an amount allocable to any pre-acquisition accrued