Company: NXDT
Filing Date: 2025-04-23
Form Type: S-4/A
Source: 0001437749-25-012810
Chunk: 168

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-23
Form: S-4/A
Chunk 168
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 qualification as a REIT will not be terminated if the violation is due to reasonable cause and not willful neglect and New NXDT pays a penalty tax of $50,000 for the violation. The immediately preceding sentence does not apply to violations of the income tests described above or a violation of the asset tests described above, each of which has specific relief provisions that are described above.

If New NXDT fails to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, New NXDT will have to pay tax, including any applicable alternative minimum tax, on New NXDT’s taxable income at the U.S. federal corporate income tax rate. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to shareholders, which in turn could have an adverse impact on the value of, and trading prices for, New NXDT’s shares. New NXDT will not be able to deduct distributions to shareholders in any year in which New NXDT fails to qualify, nor will New NXDT be required to make distributions to shareholders. In this event, to the extent of current and accumulated earnings and profits, all distributions to shareholders would be taxable to the shareholders as dividend income (which may be subject to tax at preferential rates) and corporate distributees may be eligible for the dividends-received deduction if such distributees satisfy the relevant provisions of the Code. Unless entitled to relief under specific statutory provisions, New NXDT will also be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. New NXDT might not be entitled to the statutory relief described above in all circumstances.

Taxable Mortgage Pools and Excess Inclusion Income

An entity, or a portion of an entity, may be classified as a taxable mortgage pool under the Code if:

| ● | substantially all of its assets consist of debt obligations or interests in debt obligations; |

| ● | more than 50% of those debt obligations are real estate mortgage loans or interests in real estate mortgage loans as of specified testing dates; |

| ● | the entity has issued debt obligations that have two or more maturities; and |

| ● | the payments required to be made by the entity on the debt obligations described in the third bullet “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets. |

Under applicable Treasury regulations, if less than 80% of the assets of an entity (or a portion of an entity)