Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 122

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 122
---
 Tax Considerations for Holders of Our Capital Stock
and Debt Securities—Taxation of Taxable U.S. Holders of Our Capital Stock—Dispositions of Our Capital Stock.”

Tax Rates

The maximum tax rate for
non-corporate taxpayers for (1) long-term capital gains, including certain “capital gain dividends,” is generally 20%
(although depending on the characteristics of the assets which produced these gains and on designations which we may make, certain capital
gain dividends may be taxed at a 25% rate) and (2) “qualified dividend income” is generally 20%. In general, dividends
payable by REITs are not eligible for the reduced tax rate on qualified dividend income, except to the extent that certain holding period
requirements have been met and the REIT’s dividends are attributable to dividends received from taxable corporations (such as its
TRSs) or to income that was subject to tax at the corporate/REIT level (for example, if the REIT distributed taxable income that it retained
and paid tax on in the prior taxable year). Capital gain dividends will only be eligible for the rates described above to the extent
that they are properly designated by the REIT as “capital gain dividends.” U.S. Holders that are corporations may be required
to treat up to 20% of some capital gain dividends as ordinary income. In addition, non-corporate U.S. Holders, including individuals,
generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend
income, for taxable years beginning before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for
purposes of the 3.8% Medicare tax), subject to certain holding period requirements and other limitations.

<div align='center'>44</div>

Taxation of Tax-Exempt Holders of Our Capital Stock

Dividend income from us and
gain arising upon a sale of shares of our capital stock generally should not be unrelated business taxable income, or UBTI, to a tax-exempt
holder, except as described below. This income or gain will be UBTI, however, to the extent a tax-exempt holder holds its shares as “debt-financed
property” within the meaning of the Code or if we hold an asset that gives rise to “excess inclusion income.” See “Material
U.S. Federal Income Tax Considerations—