Company: NXDT
Filing Date: 2025-04-23
Form Type: S-4/A
Source: 0001437749-25-012810
Chunk: 159

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-23
Form: S-4/A
Chunk 159
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 is excluded from gross income for purposes of either or both of the gross income tests.

If New NXDT fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, New NXDT may nevertheless qualify as a REIT for that year if New NXDT satisfies the requirements of other provisions of the Code that allow relief from disqualification as a REIT. These relief provisions will generally be available if:

| ● | New NXDT’s failure to meet the income tests was due to reasonable cause and not due to willful neglect; and |

| ● | Following identification of the failure to meet the 75% and/or 95% gross income test for any taxable year, New NXDT files a schedule of each item of income in excess of the limitations described above with the IRS in accordance with regulations to be prescribed by the IRS. |

New NXDT might not be entitled to the benefit of these relief provisions, however. Even if these relief provisions apply, New NXDT would have to pay a tax on the excess income. The tax will be a 100% tax on an amount equal to (a) the gross income attributable to the greater of (i) 75% of New NXDT’s gross income over the amount of gross income that is qualifying income for purposes of the 75% test, and (ii) 95% of New NXDT’s gross income over the amount of gross income that is qualifying income for purposes of the 95% test, multiplied by (b) a fraction intended to reflect New NXDT’s profitability.

Due to the nature of the assets in which New NXDT will invest, New NXDT may be required to recognize taxable income from certain assets in advance of its receipt of cash flow from or proceeds from disposition of such assets and may be required to report taxable income that exceeds the economic income ultimately realized on such assets.

New NXDT may originate loans with original issue discount. In general, New NXDT will be required to accrue original issue discount based on the constant yield to maturity of the loan, and to treat it as taxable income in accordance with applicable U.S. federal income tax rules even though such yield may exceed cash payments, if any, received on such loan.

New NXDT generally will be required to take certain amounts in income no later than the time such amounts are reflected in its financial statements. Section 451(b) of the Code has been amended to provide that the “all events” test for the realization of income for accrual