Company: RWT-PA
Filing Date: 2025-03-03
Form Type: S-3ASR
Source: 0001104659-25-019828
Chunk: 55

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: S-3ASR
Chunk 55
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 the income or profits of any person. Other fees are not qualifying income for purposes of either the 75% or 95% gross income test.
Any fees earned by a TRS are not included for purposes of the gross income tests.

Dividend and Certain Foreign Income

We may receive distributions
from TRSs or other corporations that are not REITs or qualified REIT subsidiaries. These distributions generally will be classified as
dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions generally will constitute
qualifying income for purposes of the 95% gross income test, but not the 75% gross income test. Any dividends we receive from a REIT
will be qualifying income in our hands for purposes of both the 95% and 75% gross income tests.

Income inclusions from equity
investments in certain foreign corporations, such as controlled foreign corporations and passive foreign investment companies, as defined
in the Code, are technically neither dividends nor any of the other enumerated categories of income specified in the 95% gross income
test for U.S. federal income tax purposes. However, under IRS guidance, certain such income inclusions generally will constitute
qualifying income for purposes of the 95% gross income test.

Hedging Transactions

From time to time, we may
enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering
into interest rate swaps, caps, and floors, options to purchase these items, and futures and forward contracts. Income from a hedging
transaction, including gain from the sale or disposition of such a transaction, that is clearly identified as a hedging transaction as
specified in the Code will not constitute gross income under, and thus will be exempt from, the 75% and 95% gross income tests. The term
“hedging transaction,” as used above, generally means (A) any transaction we enter into in the normal course of our business
primarily to manage risk of (1) interest rate changes or fluctuations with respect to borrowings made or to be made by us to acquire
or carry real estate assets, or (2) currency fluctuations with respect to an item of qualifying income under the 75% or 95% gross income
test or any property which generates such income and (B) new transactions entered into to hedge the income or loss from prior hedging
transactions, where the property or indebtedness which was the subject of the prior hed