Company: NXDT
Filing Date: 2025-04-23
Form Type: S-4/A
Source: 0001437749-25-012810
Chunk: 176

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-04-23
Form: S-4/A
Chunk 176
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 circumstances, these distributions may be intended to be treated as dividends for U.S. federal income tax purposes and a U.S. stockholder would, therefore, generally have taxable income with respect to such distributions of shares of New Stock and may have a tax liability on account of such distribution in excess of the cash (if any) that is received.

U.S. stockholders holding shares of New Stock at the close of New NXDT’s taxable year will be required to include, in computing the U.S. stockholders’ long-term capital gains for the taxable year in which the last day of New NXDT’s taxable year falls, the amount of New NXDT’s undistributed net capital gain that New NXDT designates in a written notice mailed to its stockholders. New NXDT may not designate amounts in excess of New NXDT’s undistributed net capital gain for the taxable year. Each U.S. stockholder required to include the designated amount in determining the stockholder’s long-term capital gains will be deemed to have paid, in the taxable year of the inclusion, the tax paid by New NXDT in respect of the undistributed net capital gains. U.S. stockholders to whom these rules apply will be allowed a credit or a refund, as the case may be, for the tax such stockholders are deemed to have paid. U.S. stockholders will increase their basis in the shares of New Stock by the difference between the amount of the includible gains and the tax deemed paid by the stockholder in respect of these gains.

Distributions made by New NXDT and gain arising from a U.S. stockholder’s sale or exchange of shares of New Stock will not be treated as passive activity income. As a result, U.S. stockholders generally will not be able to apply any passive losses against that income or gain. A U.S. stockholder may elect to treat capital gain dividends, capital gains from the disposition of New NXDT shares and qualified dividend income as investment income for purposes of computing the investment interest limitation, but in such case, the U.S. stockholders will be taxed at ordinary income rates on such amount. Other distributions New NXDT makes (to the extent they do not constitute a return of capital) generally will be treated as investment income for purposes of computing the investment interest limitation. Gain arising from the sale or other disposition of New NXDT shares, however, will not be treated as investment income under certain circumstances.

Retention of Net Long-Term Capital Gains. New NXDT may elect to retain,