Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 2271

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 2271
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 the Company is entitled to relief under specific statutory provisions. As of March 31, 2024, the Company believes it is in compliance with all applicable REIT requirements.

As a REIT for U.S. federal income tax purposes, the Company may deduct earnings distributed to shareholders against the income generated by our REIT operations. The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries. Our consolidated net loss before income taxes was $21.0 million and $18.7 million for the three months ended March 31, 2024 and 2023, respectively. The Company’s consolidated balance sheet as of March 31, 2024 consists of a $4.5 million net deferred tax asset at NHF TRS, LLC and a $1.6 million net deferred tax liability at NREO TRS, Inc. for a consolidated net Deferred Tax asset of $2.9 million. The Company's consolidated balance sheet as of December 31, 2023 consisted of a $4.5 million net deferred tax asset at NHF TRS, LLC and a $1.6 million net deferred tax liability at NREO TRS, Inc. for a consolidated net Deferred Tax asset of $2.9 million.

The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Our effective tax rates for the three months ended March 31, 2024 and 2023 were (2.62)% and (4.31)%, respectively. Our effective tax rate differs from the U.S. federal statutory corporate tax rate of 21.0% primarily due to our REIT operations generally not being subject to federal income taxes.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more-likely-than-not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of March 31, 2024 and 2023. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2023, 2022, 2021 and 2020 tax