Company: NXDT
Filing Date: 2025-06-12
Form Type: S-4
Source: 0001437749-25-020201
Chunk: 84

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-06-12
Form: S-4
Chunk 84
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 that does not provide New NXDT with such stockholder’s correct taxpayer identification number. Backup withholding is not an additional tax. A stockholder may credit any amount paid as backup withholding against the stockholder’s income tax liability. In addition, New NXDT may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to New NXDT.

Taxation of Tax-Exempt Stockholders. The IRS has ruled that amounts distributed as dividends by a REIT generally do not constitute unrelated business taxable income when received by a tax-exempt entity. Based on that ruling, provided that a tax-exempt stockholder is not one of the types of entity described below and has not held the shares of New Stock as “debt financed property” within the meaning of the Code, the dividend income from the shares of New Stock will not be unrelated business taxable income to a tax-exempt stockholder. Similarly, income from the sale of shares of New Stock will not constitute unrelated business taxable income unless the tax-exempt stockholder has held the shares as “debt financed property” within the meaning of the Code or has used the shares in a trade or business.

Notwithstanding the above paragraph, tax-exempt stockholders will be required to treat as unrelated business taxable income any dividends paid by New NXDT that are allocable to New NXDT’s “excess inclusion” income, if any.

Income from an investment in shares of New Stock will constitute unrelated business taxable income for tax-exempt stockholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. federal income taxation under the applicable subsections of Section 501(c) of the Code, unless the organization is able to properly deduct amounts set aside or placed in reserve for certain purposes so as to offset the income generated by the shares of New Stock. Prospective investors of the types described in the preceding sentence should consult such investors’ own tax advisors concerning these “set aside” and reserve requirements.

Notwithstanding the foregoing, however, a portion of the dividends paid by a “pension-held REIT” will be treated as unrelated business taxable income to any trust that

| ● | is described in certain provisions of the Code relating to qualified pension, profit-sharing and stock bonus plans; |

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| ● | is described in certain provisions of the Code relating to tax-exempt organizations; and |

| ● | holds more than 10