Company: NXDT
Filing Date: 2025-06-12
Form Type: S-4
Source: 0001437749-25-020201
Chunk: 77

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-06-12
Form: S-4
Chunk 77
---
 by New NXDT in other entities classified as partnerships for such purposes.

A partnership (that is not a publicly traded partnership taxed as a corporation) is not subject to tax as an entity for U.S. federal income tax purposes. Rather, partners are allocated their allocable share of the items of income, gain, loss, deduction and credit of the partnership, and are potentially subject to tax thereon, without regard to whether the partners receive any distributions from the partnership. New NXDT will be required to take into account its allocable share of the foregoing items for purposes of the various REIT gross income and asset tests, and in the computation of its REIT taxable income and U.S. federal income tax liability. Further, there can be no assurance that distributions from its OP will be sufficient to pay the tax liabilities resulting from an investment in its OP.

<div align='center'>56</div>

New NXDT intends that interests in its OP (and any partnership invested in by its OP) will fall within one of the “safe harbors” for the partnership to avoid being classified as a publicly traded partnership. However, New NXDT reserves the right to not satisfy any safe harbor. Even if a partnership is a publicly traded partnership, it generally will not be taxed as a corporation if at least 90% of its gross income each taxable year is from certain sources, which generally include rents from real property and other types of passive income. We believe that our OP will have sufficient qualifying income so that it would be treated as a partnership, even if it were a publicly traded partnership.

To the extent that New NXDT’s OP (or any subsidiary partnership in which its OP owns an interest) were treated as a taxable mortgage pool, it would be taxable as a corporation for U.S. federal income tax purposes. In such case, New NXDT may not be able to qualify as a REIT. We do not believe that our OP (or any subsidiary partnership in which our OP owns an interest) will be treated as a taxable mortgage pool, but no assurance can be given that it will not be treated as such.

If for any reason New NXDT’s OP (or any partnership invested in by New NXDT’s OP) is taxable as a corporation for U.S. federal income tax purposes, the character of New NXDT’s assets and items of gross income would change, and as a result, New NXDT would most likely be unable to satisfy the applicable REIT requirements discussed above. In addition, any change in the status of any