Company: RWT-PA
Filing Date: 2025-03-03
Form Type: S-3ASR
Source: 0001104659-25-019828
Chunk: 50

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: S-3ASR
Chunk 50
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 than 50% of those debt obligations are real estate mortgages or interests in real estate 
 mortgages as of specified testing dates;                                                 |

| · | the                                                                      
 entity has issued debt obligations that have two or more maturities; and |

| · | the                                                                                           
 payments required to be made by the entity on its debt obligations “bear a relationship”      
 to the payments to be received by the entity on the debt obligations that it holds as assets. |

Under applicable Treasury
Regulations, if less than 80% of the assets of an entity (or a portion of an entity) consist of debt obligations, these debt obligations
are considered not to comprise “substantially all” of its assets, and therefore the entity would not be treated as a TMP.
We may enter into financing and securitization arrangements that give rise to TMPs.

A TMP generally is treated
as a corporation for U.S. federal income tax purposes. However, special rules apply to a REIT, a portion of a REIT, or a qualified
REIT subsidiary that is a TMP. If a REIT owns directly, or indirectly through one or more qualified REIT subsidiaries or other entities
that are disregarded entities for U.S. federal income tax purposes, 100% of the equity interests in the TMP, the TMP will be a qualified
REIT subsidiary and, therefore, disregarded as an entity separate from the REIT for U.S. federal income tax purposes and would not
generally affect the tax qualification of the REIT. Rather, the consequences of the TMP classification would generally be limited to
the REIT’s shareholders. See “Material U.S. Federal Income Tax Considerations—Taxation of the Company—Excess
Inclusion Income.”

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Excess Inclusion Income

A portion of income from
a TMP arrangement, which might be non-cash accrued income, could be treated as “excess inclusion income.” A REIT’s
excess inclusion income, including any excess inclusion income from a residual interest in a REMIC, must be allocated among its shareholders
in proportion to dividends paid. We generally do not expect to generate excess inclusion income that would be allocated to our stockholders.
In the event we do generate excess inclusion income, we are required to notify our stockholders of the amount of such income allocated
to them. A shareholder’s share of excess inclusion income:

| · | cannot                                                                        
 be offset by any net operating losses otherwise