Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 90

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 90
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Penalty Tax.”                                                                                |

| · | We may elect                                                                                                                                 
 to retain and pay income tax on our net capital gain. In that case, a stockholder would include its proportionate share of our undistributed 
 capital gain (to the extent we make a timely designation of such gain to the stockholder) in its income, would be deemed to have             
 paid the tax that we paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to have been             
 paid, and an adjustment would be made to increase the tax basis of the stockholder in our capital stock.                                     |

| · | If we fail                                                                                                                              
 to comply with the requirement to send annual letters to our stockholders holding at least a certain percentage of our stock, as        
 determined under applicable Treasury Regulations, requesting information regarding the actual ownership of our stock, and the failure   
 is not due to reasonable cause or is due to willful neglect, we will be subject to a $25,000 penalty, or if the failure is intentional, 
 a $50,000 penalty.                                                                                                                      |

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We and our subsidiaries may
be subject to a variety of taxes other than U.S. federal income tax, including payroll taxes and state and local income, property and
other taxes on our assets and operations.

Requirements for Qualification as a REIT

The Code defines a REIT as
a corporation, trust or association:

| (1) | that is managed by one or more trustees 
 or directors;                           |

| (2) | that issues                                                                            
 transferable shares or transferable certificates to evidence its beneficial ownership; |

| (3) | that would                                                                          
 be taxable as a domestic corporation, but for Sections 856 through 860 of the Code; |

| (4) | that is not                                                                                           
 a financial institution or an insurance company within the meaning of certain provisions of the Code; |

| (5) | that is beneficially          
 owned by 100 or more persons; |

| (6) | not more than                                                                                                                        
 50% in value of the outstanding stock of which is owned, actually or constructively, by five or fewer individuals, including certain 
 specified entities, during the last half of each taxable year; and                                                                   |

| (7) | that meets                                                                                                       
 other tests, described below, regarding the nature of its income and assets and the amount of its distributions. |

The Code provides that conditions
(1)