Company: RWT-PA
Filing Date: 2025-08-22
Form Type: 424B5
Source: 0001104659-25-081925
Chunk: 97

Company: REDWOOD TRUST INC
Filing Date: 2025-08-22
Form: 424B5
Chunk 97
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 interest, plus the amount, if any, included in income by the U.S. Holder on an adjustment to the conversion rate of the note, as described in “Material U.S. Federal Income Tax Considerations — Federal Income Tax Considerations for Holders of the Notes and Our Common Stock — Taxation of U.S. Holders of the Notes — Constructive Distributions” below, plus any market discount included in income, reduced by amortized bond premium. Any gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder has held the note for more than one year at the time of such sale or other taxable disposition. Otherwise, such gain or loss will be short-term capital gain or loss. Long-term capital gains recognized by certain non-corporate U.S. Holders, including individuals, generally will be taxable at reduced rates. The deductibility of capital losses is subject to limitations.

Conversion of Notes

If a U.S. Holder presents a note for conversion, it may receive solely cash or a combination of cash and common stock in exchange for the note, depending upon our chosen settlement method.

If a U.S. Holder receives solely cash in exchange for a note upon conversion, the U.S. Holder’s gain or loss will be determined in the same manner as if the U.S. Holder disposed of the note in a taxable disposition (as described above under “— Sale, Exchange, Redemption or Other Taxable Disposition”).

As described below, the tax treatment of a conversion of a note into a combination of cash and common stock is uncertain and subject to different possible characterizations, and U.S. Holders should consult their tax advisors regarding the consequences of such a conversion.

Treatment as a Recapitalization. If a combination of cash and common stock is received by a U.S. Holder upon conversion of a note, we intend to take the position that the notes are securities for U.S. federal income tax purposes and to treat the conversion as a recapitalization. In such case, gain, but not loss, would be recognized by the U.S. Holder equal to the excess of the fair market value of our common stock and cash received (other than amounts attributable to any accrued but unpaid interest, which will be taxable as interest to the extent not previously included in income) over the U.S. Holder’s adjusted tax basis in the note, but in no event would the gain recognized exceed the amount of cash received (excluding any cash received in lieu of a