Company: ADAMM
Filing Date: 2025-07-01
Form Type: 424B5
Source: 0001104659-25-064730
Chunk: 134

Company: ADAMAS TRUST, INC.
Filing Date: 2025-07-01
Form: 424B5
Chunk 134
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 the deduction for qualified business income or NOLs. For partnerships, the interest deduction limit is applied at the partnership level, subject to certain adjustments to the partners for unused deduction limitations at the partnership level. A real property trade or business may elect out of this interest limit so long as it uses a 40-year recovery period for nonresidential real property, a 30-year recovery period for residential rental property, and a 20-year recovery period for related improvements. For this purpose, a real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operating, management, leasing, or brokerage trade or business. As a mortgage REIT, we do not believe that our business constitutes a “real property trade or business.” However, as a mortgage REIT, we do not believe we will be negatively impacted by the 30% limitation on the deductibility of interest because interest expense still may be fully deducted to the extent of interest income. Any disallowed interest expense may be carried forward indefinitely (subject to special rules for partnerships).

In addition, for taxable years beginning after December 31, 2020, any NOL deduction is limited to 80% of taxable income (before the deduction). NOL carrybacks are not allowed, but indefinite NOL carryforwards are allowed.

Although several types of non-cash income are excluded in determining the annual distribution requirement, we will incur U.S. federal corporate income tax and the 4% nondeductible excise tax with respect to those non-cash income items if we do not distribute those items on a current basis. As a result of the foregoing, we may have less cash than is necessary to distribute all of our taxable income and thereby avoid U.S. federal corporate income tax and the excise tax imposed on certain undistributed income. In such a situation, we may need to borrow funds or issue additional common or preferred stock.

We may satisfy the 90% distribution test with taxable distributions of our stock or debt securities. The IRS has issued Revenue Procedure 2017-45, authorizing elective cash/stock dividends to be made by publicly offered REITs. Pursuant to Revenue Procedure 2017-45, the IRS will treat the distribution of stock pursuant to an elective cash/stock dividend as a distribution of property under Section 301 of the Code (i.e., a dividend), as long as at least 20% of the total dividend is available in cash and certain other parameters detailed in the Revenue Procedure are