Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 1609

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 1609
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 Company may deduct earnings distributed to shareholders against the income generated by our REIT operations. The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries. The Company’s Consolidated Balance Sheet as of September 30, 2024 consists of a $18.0 million gross deferred tax asset at NHF TRS, LLC, a valuation allowance of $13.5 million for a consolidated net deferred tax asset of $4.5 million, a $0.3 million gross deferred tax asset at NREO TRS, Inc., a $2.1 million gross deferred tax liability at NREO TRS, Inc. for a consolidated net deferred tax liability of $1.8 million, a $6.2 million gross deferred tax asset at NHT's TRSs, a gross deferred tax liability of $0.0 million at NHT's TRSs, and a valuation allowance of $6.2 million at NHT's TRSs for a consolidated net deferred tax asset of $0.0 million. The Company's Consolidated Balance Sheet as of December 31, 2023 consisted of a $4.5 million net deferred tax asset at NHF TRS, LLC and a $1.8 million net deferred tax liability at NREO TRS, Inc. for a consolidated net deferred tax asset of $2.7 million.

The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Our effective tax rates for the three months ended September 30, 2024 and 2023 were (4.76)% and (0.49)%, respectively. Our effective tax rates for the nine months ended September 30, 2024 and 2023 were (3.38)% and (1.45)%, respectively. Our effective tax rate differs from the U.S. federal statutory corporate tax rate of 21.0% primarily due to our REIT operations generally not being subject to federal income taxes.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more-likely-than-not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or