Company: EQS
Filing Date: 2025-04-10
Form Type: 10-K
Source: 0001712543-25-000016
Chunk: 32

Company: EQUUS TOTAL RETURN, INC.
Filing Date: 2025-04-10
Form: 10-K
Item: Item 8
Chunk 32
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 financing. We seek to achieve capital appreciation
by making investments in equity and equity- oriented securities issued by privately-owned companies in transactions negotiated directly
with such companies. Given market conditions over the past several years and the performance of our portfolio, our Management and Board
of Directors believe it prudent to continue to review alternatives to refine and further clarify the current strategies.

We elected
to be treated as a BDC under the Investment Company Act of 1940 Act (“1940 Act”), although our shareholders have previously
authorized us to withdraw this election and, although such authorization has expired, will likely do so again in the future. Prior to
the fourth quarter of 2024, we qualified as a regulated investment company (“ RIC”) for federal income tax purposes and, therefore,
were not required to pay corporate income taxes on any income or gains that wewould have distributeddistribute to our stockholders. During the fourth quarter of 2024, we elected to not qualify as a RIC and, consequently, we will
be subject to normal corporate rates of taxation of our income and gains and will not be permitted to deduct distributions paid to our
stockholders.

We
have certain wholly owned taxable subsidiaries (“ Taxable Subsidiaries”) that were created to help us maintain our RIC
status, each of which holds one or more portfolio investments listed on our Schedules of Investments. The purpose of these Taxable
Subsidiaries was to permit us to hold certain income- producing investments or portfolio companies organized as limited liability
companies, or LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our
gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a portion of the gross
income of these income-producing investments or of any LLC (or other pass-through entity) portfolio investment, as the case may be,
would flow through directly to us for the 90% test. Since we have elected to not qualify as a RIC, the income of these Taxable
Subsidiaries may be taxable to Equus, which is now classified as a Subchapter C or corporation. To the extent that such income did
not consist of investment income, it could jeopardize our ability torequalify as a RIC
and, therefore, cause us to incur federal income taxes as described above. The income of the LLCs (or other pass-through entities)
owned by Tax