Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 94

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 94
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 recognizes as income the dividends, if any, that it receives from the TRS. A REIT’s ownership of securities
of a TRS is not subject to the 5% or 10% asset test described below. See “Material U.S. Federal Income Tax Considerations—Taxation
of the Company—Asset Tests.” For taxable years beginning after December 31, 2017, taxpayers are subject to a limitation
on their ability to deduct net business interest generally equal to 30% of adjusted taxable income, subject to certain exceptions. See
“Material U.S. Federal Income Tax Considerations—Taxation of the Company—Annual Distribution Requirements.” While
not certain, this provision may limit the ability of our TRSs to deduct interest, which could increase their taxable income.

Non-U.S. TRSs that are not
engaged in trade or business in the United States for tax purposes generally are not subject to U.S. corporate income taxation. However,
certain U.S. shareholders of such non-U.S. corporations may be required to include in their income currently their proportionate share
of the earnings of such a corporation, whether or not such earnings are distributed. This could affect our ability to comply with the
REIT income tests and distribution requirement. See “Material U.S. Federal Income Tax Considerations—Taxation of the Company—Income
Tests” and “Material U.S. Federal Income Tax Considerations—Taxation of the Company—Annual Distribution Requirements.”
We currently do not own interests in any non-U.S. TRS, but we may acquire interests in such TRSs in the future.

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We may hold a significant
number of assets in one or more TRSs, subject to the limitation that securities in TRSs may not represent more than 20% of our total
assets (25% for taxable years beginning after July 30, 2008 and before January 1, 2018). We may engage in securitization transactions
through our TRSs, and to the extent that we acquire loans with an intention of selling such loans in a manner that might expose us to
a 100% tax on “prohibited transactions,” such loans may be acquired by a TRS.

Certain restrictions imposed
on TRSs are intended to ensure that such entities will be subject to appropriate levels of U.S. federal income taxation. For example,
if amounts are paid to a REIT or deducted by