Company: NXDT
Filing Date: 2025-04-23
Form Type: S-4/A
Source: 0001437749-25-012810
Chunk: 167

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-23
Form: S-4/A
Chunk 167
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 procedure creating a safe harbor authorizing publicly traded REITs to make elective cash/shares dividends that fully qualify for the dividends paid deduction. Old NXDT has previously paid portions of dividends on its common shares in common shares of Old NXDT pursuant to this revenue procedure in order to conserve cash for additional investments. If New NXDT elects to do so in the future, we expect that any such distribution would comply with the requirements of the revenue procedure. Subsequently, New NXDT may pay dividends solely in cash at some point in the future when cash flow from operations supports such a cash dividend. However, there can be no assurance that cash flow from operations will be able to support a cash dividend in the future.

Furthermore, from time to time, New NXDT may not have sufficient cash or other liquid assets to meet the 90% distribution requirement due to timing differences between (a) when New NXDT actually receives income and when New NXDT actually pays deductible expenses and (b) when New NXDT includes the income and deducts the expenses in arriving at New NXDT’s taxable income. If timing differences of this kind occur, in order to meet the 90% distribution requirement, New NXDT may find it necessary to arrange for short-term, or possibly long-term, borrowings or to pay dividends in the form of taxable stock dividends.

Under certain circumstances, New NXDT may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to shareholders in a later year, which may be included in New NXDT’s deduction for dividends paid for the earlier year. Thus, New NXDT may be able to avoid being taxed on amounts distributed as deficiency dividends; however, New NXDT will be required to pay interest based upon the amount of any deduction taken for deficiency dividends.

Recordkeeping Requirements. New NXDT is required to maintain records and request on an annual basis information from specified shareholders. These requirements are designed to assist New NXDT in determining the actual ownership of its stock and maintaining its qualification as a REIT. New NXDT intends to comply with these requirements. A shareholder that fails or refuses to comply with such requests is required by Treasury regulations to submit a statement with its tax return disclosing the actual ownership of our shares and other information.

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Failure to Qualify as a Real Estate Investment Trust

If New NXDT would otherwise fail to qualify as a REIT because of a violation of one of the requirements described above, New NXDT’s