Company: NXDT
Filing Date: 2025-04-23
Form Type: S-4/A
Source: 0001437749-25-012810
Chunk: 61

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-23
Form: S-4/A
Chunk 61
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 income for United States federal income tax purposes when such an award vests or otherwise is free of restrictions. In any event, Old NXDT will be entitled to a deduction at the time when, and in the amount that, a participant recognizes ordinary income.

Profits Interest Units:A participant subject to United States federal income tax who is granted a profits interest unit generally is not expected to recognize taxable income at the time of grant or the vesting of those units, provided that (a) the award qualify as “profits interests” within the meaning of IRS Revenue Procedures 93-27 and 2001-43; (b) the participant does not dispose of the units within two years of issuance; and (c) certain other requirements are met. Participants generally would make the election provided for under Section 83(b) of the Code, recognizing zero income at the time of grant, in which case the profits interest units could be disposed of within two years of issuance. As a holder of profits interest units, however, a participant will be required to report on his or her income tax return his or her allocable share of the OP’s income, gains, losses, deductions and credits in accordance with the Partnership Agreement, regardless of whether the OP actually makes a distribution of cash to the participant. Distributions of money by the OP to the participant, will generally be taxable to the grantee to the extent that such distributions exceed the participant’s tax basis in the OP. Any such gain generally will be capital gain, but a portion may be treated as ordinary income, depending on the assets of the OP at that time. Generally, no deduction is available to Old NXDT upon the grant, vesting or disposition of the units.

Tax Withholding: Old NXDT has the right to deduct or withhold, or require a participant to remit to Old NXDT, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of grants under the plans.

Certain Tax Code Limitations on Deductibility: Section 162(m) of the Code generally limits the deductible amount of total annual compensation paid by a public company to each “covered employee” to no more than $1 million. In addition, our ability to obtain a deduction for future payments could be limited by Section 280G of the Code, which provides that certain payments made in connection with a change in control are not deductible by Old NXDT (and may be