Company: BHM
Filing Date: 2025-04-07
Form Type: POS AM
Source: 0001104659-25-032524
Chunk: 358

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-04-07
Form: POS AM
Chunk 358
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 the contribution, or the 704(c) Allocations. The amount of the unrealized gain or unrealized loss,
or built-in gain or built-in loss, respectively, is generally equal to the difference between the fair market value of the contributed
property at the time of contribution and the adjusted tax basis of such property at the time of contribution, or a book-tax difference.
Any property purchased for cash initially will have an adjusted tax basis equal to its fair market value, resulting in no book-tax difference.
A book-tax difference generally is decreased on an annual basis as a result of depreciation deductions to the contributing partner for
book purposes but not for tax purposes. The 704(c) Allocations are solely for U.S. federal income tax purposes and do not affect
the book capital accounts or other economic or legal arrangements among the partners. In the future, our Operating Partnership may acquire
property that may have a built-in gain or a built-in loss in exchange for OP Units. Our Operating Partnership will have a carryover, rather
than a fair market value, adjusted tax basis in such contributed assets equal to the adjusted tax basis of the contributors in such assets,
resulting in a book-tax difference. As a result of that book-tax difference, we will have a lower adjusted tax basis with respect to that
portion of our Operating Partnership’s assets than we would have with respect to assets having a tax basis equal to fair market
value at the time of acquisition. This could result in lower depreciation deductions with respect to the portion of our Operating Partnership’s
assets attributable to such contributions.

The U.S. Treasury Department
has issued regulations requiring partnerships to use a “reasonable method” for allocating items with respect to which there
is a book-tax difference and outlining several reasonable allocation methods. Under certain available methods, the carryover basis of
contributed properties in the hands of our Operating Partnership (1) could cause us to be allocated lower amounts of depreciation
deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax basis equal to their fair market
value at the time of the contribution and (2) in the event of a sale of such properties, could cause us to be allocated taxable gain
in excess of the economic or book gain allocated to us as a result of such sale, with a corresponding benefit to the contributing partners.
An allocation described in (2) above might cause us to recognize taxable income in excess of cash proceeds in the event of a sale
or other disposition of property,