Company: NXDT
Filing Date: 2025-01-30
Form Type: 424B5
Source: 0001437749-25-002263
Chunk: 57

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-30
Form: 424B5
Chunk 57
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, such constructive distributions, if any, would generally be deemed to occur on each date an adjustment to the conversion rate is made in accordance with the terms of such Series B Preferred Shares.

Cash received in lieu of a fractional common share will generally be treated as a payment in a taxable exchange for such fractional common shares, and gain or loss will generally be recognized in an amount equal to the difference between the amount of cash received and the portion of the U.S. Holder's adjusted tax basis allocable to the fractional common shares.

Prospective investors are urged to consult with their tax advisors regarding the U.S. federal income tax consequences of any transaction by which such U.S. Holder exchanges shares received on a conversion of Series B Preferred Shares for common shares.

Redemption of Series B Preferred Shares

A redemption of Series B Preferred Shares will be treated under Section 302 of the Code as a distribution that is taxable as dividend income (to the extent of our current and accumulated earnings and profits), unless the redemption satisfies an exception found in Section 302(b) of the Code enabling the redemption to be treated as a sale of the Series B Preferred Shares (in which case the redemption will be treated in the same manner as a disposition described in the accompanying prospectus under “Material U.S. Federal Income Tax Considerations—Taxation of Shareholders—Disposition of Our Shares”). The redemption will satisfy such tests if it (i) is “substantially disproportionate” with respect to the interest of the U.S. Holder (as defined in the accompanying prospectus) in our shares, (ii) results in a “complete termination” of the U.S. Holder’s interest in all classes of our shares or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder, all within the meaning of Section 302(b) of the Code. In determining whether any of these tests have been met, shares considered to be owned by the U.S. Holder by reason of certain constructive ownership rules set forth in the Code, as well as shares actually owned, generally must be taken into account. Because the determination as to whether any of the three alternative tests of Section 302(b) of the Code described above will be satisfied with respect to any particular U.S. Holder of Series B Preferred Shares depends upon the facts and circumstances at the time that the determination must be made, prospective investors are urged to consult their own tax advisors to determine such tax treatment.

If a redemption of the Series B Preferred Shares does not meet any of the three