Company: NXDT
Filing Date: 2025-08-22
Form Type: S-3
Source: 0001437749-25-027604
Chunk: 46

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-08-22
Form: S-3
Chunk 46
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 be treated first as a tax-free return of capital to each U.S. Holder. This treatment will reduce the adjusted tax basis that each U.S. Holder has in its shares of our shares for U.S. federal income tax purposes by the amount of the distribution (but not below zero). Distributions in excess of a U.S. Holder’s adjusted tax basis in its shares of the Company will be taxable as capital gains (provided that the shares have been held as a capital asset) and will be taxable as long-term capital gain if the shares have been held for more than one year. Dividends we declare in October, November, or December of any taxable year and payable to a shareholder of record on a specified date in any of these months will be treated as both paid by us and received by the shareholders on December 31 of that year, provided we actually pay the dividend on or before January 31 of the following calendar year. Shareholders may not include in their own U.S. federal income tax returns any of our net operating losses or capital losses. Instead, subject to certain limitations, these losses are generally carried over by us for potential offset against our future income.

| ■ | Capital Gain Distributions |

Distributions that we properly designate as capital gain dividends (and undistributed amounts for which we properly make a Capital Gains Designation (defined below)) will be taxable to U.S. Holders as gains (to the extent that they do not exceed our actual net capital gain for the taxable year) from the sale or disposition of a capital asset. Depending on the period of time we have held the assets which produced these gains, and on certain designations, if any, which we may make, these gains may be taxable to non-corporate U.S. Holders at preferential rates, depending on the nature of the asset giving rise to the gain. Corporate U.S. Holders may, however, be required to treat up to 20% of certain capital gain dividends as ordinary income.

| ■ | Passive Activity Losses and Investment Interest Limitations |

Distributions we make and gain arising from the sale or exchange by a U.S. Holder of our shares will be treated as portfolio income. As a result, U.S. Holders generally will not be able to apply any “passive losses” against this income or gain. A U.S. Holder may elect to treat capital gain dividends, capital gains from the disposition of our shares and qualified dividend income as investment income for purposes of computing the investment interest limitation,