Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 104

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 104
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. Under existing law, whether an asset
is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends
on all the facts and circumstances surrounding the particular transaction. We intend to conduct our operations so that no asset we own
will be held as inventory or primarily for sale to customers, and that a sale of any assets we own will not be in the ordinary course
of business. However, the IRS may successfully assert that some or all of the sales made by us, our qualified REIT subsidiaries or our
subsidiary partnerships, or by a borrower that has issued a shared appreciation mortgage or similar debt instrument to us, are prohibited
transactions. We would be required to pay the 100% penalty tax on our allocable share of the gains resulting from any such sales. The
100% penalty tax will not apply to gains from the sale of assets that are held through a TRS, but such income will be subject to regular
U.S. federal corporate income tax.

Foreclosure Property

Foreclosure property is real
property and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having
bid on the property at foreclosure or having otherwise reduced the property to ownership or possession by agreement or process of law
after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the
property, (2) for which the related loan or lease was acquired by the REIT at a time when default was not imminent or anticipated
and (3) for which such REIT makes a proper election to treat the property as foreclosure property. REITs generally are subject to
tax at the U.S. federal corporate income tax rate (currently 21%) on any net income from foreclosure property, including any gain from
the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross
income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100%
tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property
in the hands of the selling REIT. If we believe we will receive any income from foreclosure property that is not qualifying income for
purposes of the 75% gross income test, we intend to elect to treat the