Company: NXDT
Filing Date: 2025-06-12
Form Type: S-4
Source: 0001437749-25-020201
Chunk: 65

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-06-12
Form: S-4
Chunk 65
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 any taxable year, New NXDT files a schedule of each item of income in excess of the limitations described above with the IRS in accordance with regulations to be prescribed by the IRS. |

New NXDT might not be entitled to the benefit of these relief provisions, however. Even if these relief provisions apply, New NXDT would have to pay a tax on the excess income. The tax will be a 100% tax on an amount equal to (a) the gross income attributable to the greater of (i) 75% of New NXDT’s gross income over the amount of gross income that is qualifying income for purposes of the 75% test, and (ii) 95% of New NXDT’s gross income over the amount of gross income that is qualifying income for purposes of the 95% test, multiplied by (b) a fraction intended to reflect New NXDT’s profitability.

Due to the nature of the assets in which New NXDT will invest, New NXDT may be required to recognize taxable income from certain assets in advance of its receipt of cash flow from or proceeds from disposition of such assets and may be required to report taxable income that exceeds the economic income ultimately realized on such assets.

New NXDT may originate loans with original issue discount. In general, New NXDT will be required to accrue original issue discount based on the constant yield to maturity of the loan, and to treat it as taxable income in accordance with applicable U.S. federal income tax rules even though such yield may exceed cash payments, if any, received on such loan.

New NXDT generally will be required to take certain amounts in income no later than the time such amounts are reflected in its financial statements. Section 451(b) of the Code has been amended to provide that the “all events” test for the realization of income for accrual method taxpayers is treated as being met no later than when the item is taken into account as revenue by the taxpayer in certain financial statements (including any financial statement presented in accordance with generally accepted accounting principles such as a Form 10-K annual statement, an audited financial statement or a financial statement filed with any federal agency for non-tax purposes). This rule may require the accrual of income earlier than would be the case under the general tax rules; however, Treasury regulations generally exclude original issue discount from this rule.

In addition, in the event that any loan is delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular loan are not made when due, New