Company: BHM
Filing Date: 2025-07-08
Form Type: DRS
Source: 0001104659-25-066400
Chunk: 346

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-07-08
Form: DRS
Chunk 346
---
 we may be allocated a share of net capital gain
attributable to the sale of depreciated property that exceeds our allocable share of cash attributable to that sale. We generally will
be required to recognize certain amounts as income no later than the time such amounts are reflected on certain financial statements.

In addition, a taxpayer’s
net interest expense deduction may be limited to 30% of the sum of adjusted taxable income, business interest and certain other amounts.
Adjusted taxable income does not include items of income or expense not allocable to a trade or business, business interest or expense,
the deduction for qualified business income. and NOLs. For partnerships, the interest deduction limit is applied at the partnership level,
subject to certain adjustments to the partners for unused deduction limitation at the partnership level. Disallowed interest expense is
carried forward indefinitely (subject to special rules for partnerships). A “real property trade or business” may elect
out of this interest limit so long as it uses a 40-year recovery period for nonresidential real property, a 30-year recovery period for
residential real property and a 20-year recovery period for related improvements. For this purpose, a real property trade or business
is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operating, management,
leasing or brokerage trade or business. We believe this definition encompasses our business and thus will allow us the option of electing
out of the limits on interest deductibility should we determine it is prudent to do so.

Taxpayers that do not use
the real property trade or business exception to the business interest deduction limits may use 39-year and 27.5-year straight line recovery
periods for nonresidential real property and residential rental property, respectively, and a general 15-year recovery period for tenant
improvements. Also, taxpayers may expense 100% of certain new or used tangible property.

In addition, the NOL deduction
is generally limited to 80% of taxable income (before the deduction). REITs may indefinitely carryforward (but not carryback) NOLs.

As a result of the foregoing,
we may have less cash than is necessary to distribute taxable income sufficient to avoid U.S. federal corporate income tax and the excise
tax imposed on certain undistributed income or even to meet the 90% distribution requirement. In such a situation, we may need to borrow
funds or, if possible, pay taxable dividends in the form of common stock or