Company: BHM
Filing Date: 2025-11-18
Form Type: S-11/A
Source: 0001104659-25-113674
Chunk: 386

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-11-18
Form: S-11/A
Chunk 386
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 equal to fair market value at
the time of acquisition. This could result in lower depreciation deductions with respect to the portion of our Operating Partnership’s
assets attributable to such contributions.

The U.S. Treasury
Department has issued regulations requiring partnerships to use a “reasonable method” for allocating items with respect
to which there is a book-tax difference and outlining several reasonable allocation methods. Under certain available methods, the
carryover basis of contributed properties in the hands of our Operating Partnership (1) could cause us to be allocated lower
amounts of depreciation deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax
basis equal to their fair market value at the time of the contribution and (2) in the event of a sale of such properties, could
cause us to be allocated taxable gain in excess of the economic or book gain allocated to us as a result of such sale, with a
corresponding benefit to the contributing partners. An allocation described in (2) above might cause us to recognize taxable
income in excess of cash proceeds in the event of a sale or other disposition of property, which may adversely affect our ability to
comply with the REIT distribution requirements and may result in a greater portion of our distributions being taxed as dividends. We
have not yet decided what method our Operating Partnership will use to account for book-tax differences.

Sale of a Partnership’s Property

Generally, any gain realized
by a Partnership on the sale of property held by the Partnership for more than one year will be long-term capital gain, except for any
portion of such gain that is treated as depreciation or cost recovery recapture. Under Section 704(c) of the Code, any gain
or loss recognized by a Partnership on the disposition of contributed properties will be allocated first to the partners of the Partnership
who contributed such properties to the extent of their built-in gain or built-in loss on those properties for U.S. federal income tax
purposes. The partners’ built-in gain or built-in loss on such contributed properties will equal the difference between the partners’
proportionate share of the book value of those properties and the partners’ tax basis allocable to those properties at the time
of the contribution as reduced for any decrease in the “book-tax difference.” See “—Income Taxation of the Partnerships
and their Partners—Tax Allocations with Respect to Partnership Properties.” Any remaining gain or loss recognized by the
Partnership on the disposition of the contributed properties, and