Company: NXDT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001356115-25-000003
Chunk: 13

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-03-31
Form: 10-K
Item: Item 5
Chunk 13
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 and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to shareholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of December 31, 2024, the Company believes it is in compliance with all applicable REIT requirements.As a REIT for U.S. federal income tax purposes, the Company may deduct earnings distributed to shareholders against the income generated by our REIT operations. The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries. A reconciliation of the deferred tax asset (liability) for the periods indicated is as follows (in thousands):As of December 31, 20242023NHF TRSNREO TRSNHT TRSsCombinedNHF TRSNREO TRSCombinedDeferred Tax Assets$14,942 $290 $6,561 $21,793 $19,384 $441 $19,825 Valuation Allowance(10,487)— (6,535)(17,022)(14,896)— (14,896)Deferred Tax Liability— (2,127)(26)(2,153)— (2,033)(2,033)Deferred Tax Asset (Liability), net of Valuation Allowance$4,455 $(1,837)$— $2,618 $4,488 $(1,592)$2,896 The Company’s tax provision for annual periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Our effective tax rates for the year ended December 31, 2024 and 2023 were (2.49)% and (2.38)%, respectively