ANWORTH MORTGAGE ASSET CORP

NOTE 9. INCOME TAXES

We have elected to be taxed as a REIT and to comply with the provisions of the Code with respect thereto. Accordingly, we will not be subject to federal or state income taxes to the extent that our distributions to stockholders satisfy the REIT requirements and certain asset, income and stock ownership tests are met. We believe we currently meet all REIT requirements regarding the ownership of our common stock and the distribution of our taxable net income. Therefore, we believe that we continue to qualify as a REIT under the provisions of the Code.

Income tax expense (benefit) for the years ended December 31, 2017, 2016, and 2015 was zero. None of the components of income tax expense are significant on a separately stated basis.

At December 31, 2017 and December 31, 2016, there were no significant deferred tax assets and deferred tax liabilities.

The tables below present tax information regarding Anworth’s dividend distributions for the fiscal year ended December 31, 2017:

8.625% Series A Cumulative Preferred Stock (CUSIP 03747 20 0)


			2017
			Total				2017
			Distribution		2017		Return		Short-Term
Declaration	Record	Payable	Per		Ordinary		of		Capital		Carry-Over
Date	Date	Date	Share		Income		Capital		Gains		to 2018
10/14/16	12/30/16	01/17/17	$	—	$	—	$	—	$	—	$	—
01/26/17	03/31/17	04/17/17		0.539063		0.539063		—		—		—
04/26/17	06/30/17	07/17/17		0.539063		0.539063		—		—		—
07/27/17	09/29/17	10/16/17		0.539063		0.539063		—		—		—
10/26/17	12/29/17	01/16/18		0.539063		0.205063		—		—		0.334000
		Total	$	2.156252	$	1.822252	$	—	$	—	$	0.334000

6.25% Series B Cumulative Convertible Preferred Stock (CUSIP 03747 30 9)


			2017
			Total				2017
			Distribution		2017		Return		Short-Term
Declaration	Record	Payable	Per		Ordinary		of		Capital		Carry-Over
Date	Date	Date	Share(1)		Income		Capital		Gains		to 2018
10/14/16	12/30/16	01/17/17	$	0.006634	$	0.006634	$	—	$	—	$	—
01/26/17	03/31/17	04/17/17		0.397776		0.397776		—		—		—
04/26/17	06/30/17	07/17/17		0.399958		0.399958		—		—		—
07/27/17	09/29/17	10/16/17		0.396970		0.396970		—		—		—
10/26/17	12/29/17	01/16/18		0.390625		0.148596		—		—		0.242029
		Total	$	1.591963	$	1.349934	$	—	$	—	$	0.242029

(1)

The Series B Preferred Stock is convertible into shares of our common stock. The conversion rate is adjusted per a stated formula when distributions are made to our common stockholders. The value of any conversion rate increase is a deemed distribution for tax purposes and is taxable to holders of our Series B Preferred Stock to the extent supported by earnings and profits and is included in the table above. See Forms 8937 on our Company website for additional details.

7.625% Series C Cumulative Redeemable Preferred Stock (CUSIP 03747 40 8)


			2017
			Total				2017
			Distribution		2017		Return		Short-Term
Declaration	Record	Payable	Per		Ordinary		of		Capital		Carry-Over
Date	Date	Date	Share		Income		Capital		Gains		to 2018
10/14/16	12/30/16	01/17/17	$	—	$	—	$	—	$	—	$	—
01/26/17	03/31/17	04/17/17		0.476563		0.476563		—		—		—
04/26/17	06/30/17	07/17/17		0.476563		0.476563		—		—		—
07/27/17	09/29/17	10/16/17		0.476563		0.476563		—		—		—
10/26/17	12/29/17	01/16/18		0.476563		0.181288		—		—		0.295275
		Total	$	1.906252	$	1.610977	$	—	$	—	$	0.295275

Common Stock (CUSIP 03747 10 1)


			2017
			Total				2017
			Distribution		2017		Return		Short-Term
Declaration	Record	Payable	Per		Ordinary		of		Capital		Carry-Over
Date	Date	Date	Share		Income		Capital		Gains		to 2018
12/16/16	12/30/16	01/30/17	$	0.062630	$	0.062630	$	—	$	—	$	—
03/15/17	03/31/17	04/28/17		0.150000		0.150000		—		—		—
06/15/17	06/30/17	07/28/17		0.150000		0.150000		—		—		—
09/15/17	09/29/17	10/27/17		0.150000		0.150000		—		—		—
12/15/17	12/29/17	01/29/18		0.150000		—		—		—		0.150000
		Total	$	0.662630	$	0.512630	$	—	$	—	$	0.150000