Company: RWT-PA
Filing Date: 2025-01-15
Form Type: 424B5
Source: 0001104659-25-003632
Chunk: 103

Company: REDWOOD TRUST INC
Filing Date: 2025-01-15
Form: 424B5
Chunk 103
---
 be subject to regular
U.S. federal corporate income tax.

Foreclosure Property

Foreclosure property is real
property and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having
bid on the property at foreclosure or having otherwise reduced the property to ownership or possession by agreement or process of law
after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the
property, (2) for which the related loan or lease was acquired by the REIT at a time when default was not imminent or anticipated
and (3) for which such REIT makes a proper election to treat the property as foreclosure property. REITs generally are subject to
tax at the U.S. federal corporate income tax rate (currently 21%) on any net income from foreclosure property, including any gain from
the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross
income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100%
tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property
in the hands of the selling REIT. If we believe we will receive any income from foreclosure property that is not qualifying income for
purposes of the 75% gross income test, we intend to elect to treat the related property as foreclosure property.

Penalty Tax

Any redetermined deductions,
excess interest, redetermined rents or redetermined TRS service income we generate will be subject to a 100% penalty tax. In general,
redetermined deductions and excess interest represent any amounts that are deducted by a TRS of ours for amounts paid to us that are
in excess of the amounts that would have been deducted based on arm’s length negotiations, redetermined rents are rents from real
property that are overstated as a result of any services furnished to any of our tenants by a TRS of ours, and redetermined TRS service
income is income of a TRS of ours that is understated as a result of services provided to us or on our behalf.

We do not have any TRSs that
provide tenant services, and we intend to set any amounts payable to us by our TRSs at arm’s length rates. These determinations
are inherently factual, and the IRS has