Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 123

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 123
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Taxation of the Company—Excess Inclusion Income.” Generally, “debt-financed
property” is property the acquisition or holding of which was financed through a borrowing by the tax-exempt holder.

For tax-exempt holders that
are social clubs, voluntary employee benefit associations or supplemental unemployment benefit trusts exempt from U.S. federal income
taxation under Sections 501(c)(7), (c)(9) or (c)(17) of the Code, respectively, income from an investment in our capital stock will
constitute UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for specific
purposes so as to offset the income generated by its investment in our stock. These prospective investors should consult their tax advisors
concerning these “set aside” and reserve requirements.

Notwithstanding the above,
however, a portion of the dividends paid by a “pension-held REIT” may be treated as UBTI as to certain trusts that hold more
than 10%, by value, of the interests in the REIT. A REIT will not be a “pension-held REIT” if it is able to satisfy the “not
closely held” requirement without relying on the “look-through” exception with respect to certain trusts or if such
REIT is not “predominantly held” by “qualified trusts.” As a result of restrictions on ownership and transfer
of our capital stock contained in our charter, we do not expect to be classified as a “pension-held REIT,” and as a result,
the tax treatment described above should be inapplicable to the holders of our capital stock. However, because our common stock is (and,
we anticipate, will continue to be) publicly traded, we cannot guarantee that this will always be the case.

Taxation of Non-U.S. Holders of Our Capital Stock

The following discussion
addresses the rules governing U.S. federal income taxation of the purchase, ownership and disposition of our capital stock by Non-U.S.
Holders. These rules are complex, and no attempt is made herein to provide more than a brief summary of such rules. Accordingly,
the discussion does not address all aspects of U.S. federal income taxation and does not address other U.S. federal, state, local or
non-U.S. tax consequences that may be relevant to a Non-U.S. Holder in light of its particular circumstances. We urge Non-U.S. Holders
to consult their