Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 95

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 95
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 a TRS due to transactions between a REIT, its tenants and/or the TRS, that exceed the amount
that would be paid to or deducted by a party in an arm’s-length transaction, the REIT generally will be subject to an excise tax
equal to 100% of such excess. Furthermore, income of a TRS that is understated as a result of services provided to us or on our behalf
generally will be subject to a 100% penalty tax. See “Material U.S. Federal Income Tax Considerations—Taxation of the Company—Income
Tests—Penalty Tax.”

Ownership of Interests in Subsidiary REITs

We own and may acquire direct
or indirect interests in one or more entities that have elected or will elect to be taxed as REITs under the Code (each, a “Subsidiary
REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that
are applicable to us. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to U.S.
federal income tax and (ii) the Subsidiary REIT's failure to qualify could have an adverse effect on our ability to comply with the REIT
income and asset tests, and thus could impair our ability to qualify as a REIT unless we could avail ourselves of certain relief provisions.

Taxable Mortgage Pools

An entity, or a portion of
an entity, may be classified as a taxable mortgage pool, or a TMP, under the Code if:

| · | substantially                                                                   
 all of its assets consist of debt obligations or interests in debt obligations; |

| · | more than 50%                                                                                                            
 of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates; |

| · | the entity                                                        
 has issued debt obligations that have two or more maturities; and |

| · | the payments                                                                                                          
 required to be made by the entity on its debt obligations “bear a relationship” to the payments to be received by the 
 entity on the debt obligations that it holds as assets.                                                               |

Under applicable Treasury
Regulations, if less than 80% of the assets of an entity (or a portion of an entity) consist of debt obligations, these debt obligations
are considered not to comprise “substantially all” of its