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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount equal
to (a) the gross income attributable to the greater of the amount by which HCHI
fails the 75% or 95% test multiplied by (b) a fraction intended to reflect
HCHI's profitability. Sixth, if HCHI should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, it would be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, if HCHI has excess inclusion income (attributable to any
residual interest in a REMIC or any interest in a taxable mortgage pool) and a
disqualified organization (generally, tax-exempt entities not subject to tax on
unrelated business income, including governmental organizations) holds shares of
stock in HCHI, HCHI will be taxed at the highest corporate tax rate on the
amount of excess inclusion income for the taxable year allocable to the shares
held by such disqualified organization. Eighth, with respect to any asset (a
"Built-In Gain Asset") acquired by HCHI from a corporation which is or has been
a regular corporation in a transaction in which the basis of the Built-In Gain
Asset in the hands of HCHI is determined by reference to the basis of the asset
in the hands of the corporation, if HCHI recognizes gain on the disposition of
such asset during the ten-year period (the "Recognition Period") beginning on
the date on which such asset was acquired by HCHI, then, to the extent of the
Built-In Gain recognized by HCHI (i.e., the excess of the fair market value of
the asset over the adjusted basis of HCHI in the asset as of the beginning of
the Recognition Period), such gain will be subject to tax at the highest regular
corporate rate pursuant to Treasury Regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-In Gain assume that HCHI will make an election pursuant to IRS Notice
88-19 and that such treatment is not modified by subsequently enacted tax
legislation.
 
     It is intended that the Company will be operated so as to minimize any
taxes that will be payable by HCHI. In addition, HCHI intends to distribute
substantially all of its taxable income to its stockholders on a pro rata basis
in each year. There can be no assurance, however, that HCHI will not have to pay
tax as a result of, among other things, HCHI's failure to distribute all of its
taxable income as a result of differences in the timing between the recognition
of income and the deduction of expenses, dispositions of loans and other assets,
the management and dispositions of foreclosure properties and excused failures
to meet REIT qualification tests. In addition, it is anticipated that CMO
issuances will cause HCHI to own interests in taxable mortgage pools, as a
result of which HCHI will have excess inclusion income. See "-- Special
Considerations."
 
TAXATION OF TAXABLE AFFILIATES
 
     HCP, HCMC and HCS (and any other corporate subsidiaries of HCP) will be
fully taxable at regular corporate rates on their net income. Such income is
expected to include all of the income earned by HCP, HCMC and HCS (and any other
subsidiaries of HCP) from origination and conduit operations, loan
securitizations and due diligence and other activities. As a result, HCP will be
able to distribute only its net after-tax earnings as dividend distributions,
thereby reducing the cash available for distribution by HCHI to its
stockholders.
 
TAXATION OF TAXABLE U.S. STOCKHOLDERS
 
     The Units.  The purchase of a Unit will be treated as the purchase of an
investment unit for Federal income tax purposes. In order to determine the issue
prices of the share of Common Stock and the Warrant included in a Unit, the
aggregate purchase price for the Unit must be allocated between the share of
Common Stock and the Warrant in proportion to their relative fair market values
on the date of issuance. The allocation of the purchase price of a Unit between
the share of Common Stock and the Warrant included therein will be determined
based upon discussions between the Company and the Representative. Although HCHI
expects that such allocation will be reasonable, there can be no assurance that
the IRS will respect such allocation.
 
     The Common Stock.  As used herein, the term "U.S. Stockholder" means a
holder of shares of Common Stock who (for United States Federal income tax
purposes) (i) is a citizen or resident of the United States, (ii) is a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii) is
an estate or trust the income of which is subject to United States Federal
income taxation regardless of its source.
 
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