Company: NXDT
Filing Date: 2025-06-12
Form Type: S-4
Source: 0001437749-25-020201
Chunk: 90

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-06-12
Form: S-4
Chunk 90
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 contact their own tax advisors to determine whether they qualify for the exemption to FIRPTA.

Retention of Net Capital Gains.Although the law is not clear on the matter, it appears that amounts designated by a REIT as retained capital gains in respect of the shares held by non-U.S. stockholders generally should be treated in the same manner as actual distributions by a REIT of capital gain dividends. Under this approach, a non-U.S. stockholder would be able to offset as a credit against its U.S. federal income tax liability resulting from its proportionate share of the tax paid by New NXDT on such retained capital gains, and to receive from the IRS a refund to the extent its proportionate share of such tax paid by New NXDT exceeds its actual U.S. federal income tax liability.

Share Distributions. New NXDT may make distributions to holders of shares of New Stock that are paid in shares of New Stock. In certain circumstances, these distributions may be intended to be treated as dividends for U.S. federal income tax purposes and, accordingly, would be treated in a manner consistent with the discussion above under “–Ordinary Dividends” and “–Capital Gain Dividends.” If New NXDT (or applicable withholding agent) is required to withhold an amount in excess of any cash distributed along with the shares of New Stock, some of the shares that would otherwise be distributed will be retained and sold in order to satisfy such withholding obligations.

Sales of Shares of New Stock. Gain recognized by a non-U.S. stockholder upon a sale or exchange of shares of New Stock generally will not be taxed under FIRPTA if New NXDT is a “domestically controlled REIT,” defined generally as a REIT, less than 50% of the fair market value of the outstanding stock of which is and was held directly or indirectly by foreign persons, including through a foreign-controlled domestic corporation, at all times during a specified testing period. New NXDT believes that it will be a “domestically controlled REIT” upon the Effective Time, and, therefore, assuming that New NXDT continues to be a “domestically controlled REIT,” that taxation under FIRPTA generally will not apply to the sale of shares of New Stock. However, gain to which FIRPTA does not apply will be taxable to a non-U.S. stockholder if investment in the shares of New Stock is treated as effectively connected with the non-U.S. stockholder’s U.S. trade or business or is attributable