Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 102

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 102
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 occupant” of the property.                 
 Examples of these services include the provision of light, heat, or other utilities, trash removal and general maintenance of common     
 areas. In addition, we may employ an independent contractor from whom we derive no revenue to provide customary services to our tenants, 
 or a TRS (which may be wholly or partially owned by us) to provide both customary and non-customary services to our tenants, without     
 causing the rent we receive from those tenants to fail to qualify as “rents from real property.”                                         |

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We intend to structure any
leases so that the rent payable thereunder will qualify as “rents from real property,” but there can be no assurance we will
be successful in this regard.

Phantom Income

Due to the nature of the
assets in which we may invest, from time to time we may be required to recognize taxable income from those assets in advance of our receipt
of cash flow on or proceeds from disposition of such assets, and may be required to report taxable income in early periods that exceeds
the economic income ultimately realized on such assets.

If we were to acquire debt
instruments in the secondary market for less than their face amount, the amount of such discount generally would be treated as “market
discount” for U.S. federal income tax purposes. Accrued market discount is reported as income when, and to the extent that, any
payment of principal of the debt instrument is made, unless we elect to include accrued market discount in income as it accrues. Principal
payments on certain loans are made monthly, and consequently accrued market discount may have to be included in income each month as
if the debt instrument were assured of ultimately being collected in full. If we collect less on the debt instrument than our purchase
price plus the market discount we had previously reported as income, we may not be able to benefit from any offsetting loss deductions
in a subsequent taxable year.

If we were to acquire securities
issued with original issue discount, we would generally be required to accrue original issue discount based on the constant yield to
maturity of the securities, and to treat it as taxable income in accordance with applicable U.S. federal income tax rules even though
smaller or no cash payments were received on such debt instrument. As in the case of the market discount discussed in the preceding paragraph,
the constant yield in question would be determined and we would be taxed based on the assumption that all future payments due on securities