Company: BHM
Filing Date: 2025-10-08
Form Type: S-11
Source: 0001104659-25-097905
Chunk: 335

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-10-08
Form: S-11
Chunk 335
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 if earned directly by the parent REIT. The subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the outstanding
securities will automatically be treated as a TRS. We will not be treated as holding the assets of a TRS or as receiving any income that
the TRS earns. Rather, the stock issued by a TRS to us will be an asset in our hands, and we will treat the distributions paid to us from
such TRS, if any, as income to the extent of the TRS’s earnings and profits. This treatment may affect our compliance with the gross
income and asset tests. Because we will not include the assets and income of TRSs in determining our compliance with the REIT requirements,
we may use such entities to undertake activities indirectly, such as earning fee income, that the REIT rules might otherwise preclude
us from doing directly or through pass-through subsidiaries. Overall, no more than 20% (25% for 2026 and future tax years) of the value
of a REIT’s assets may consist of stock or securities of one or more TRSs.

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A TRS pays income tax at regular
corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid or accrued by a
TRS to its parent REIT to assure that the TRS is subject to an appropriate level of U.S. federal income taxation. For example, deductions
are disallowed for business interest expense (even if paid to third parties) in excess of the sum of a taxpayer’s business interest
income and 30% of the adjusted taxable income of the business, which is its taxable income computed without regard to business interest
income or expense, net operating losses (“NOLs”) or the pass-through income deduction. Such limitations may also impact the
amount of U.S. federal income tax paid by a TRS. Further, the TRS rules impose a 100% excise tax on certain transactions between
a TRS and its parent REIT, such as intercompany loans, or the REIT’s tenants that are not conducted on an arm’s-length basis.

A TRS may not directly or
indirectly operate or manage any healthcare facilities or lodging facilities or provide rights to any