Contract analysis

I. Executive Summary The purpose of this memorandum is to compile and analyze publicly available private letter rulings ("PLRs") that address transactions analogous to the proposed five-step reorganization of Solara Digital Infrastructure LP's ("Solara") cross-border fund platform, and to map favorable and unfavorable precedents to each of the eight specific rulings that Calderwood & Harkness LLP ("C&H") will request

II. Methodology A. Search Parameters and Databases The following databases and sources were searched in preparing this memorandum: (i) IRS Electronic Reading Room. The publicly accessible IRS Electronic Reading Room, which contains redacted PLRs, Technical Advice Memoranda ("TAMs"), Chief Counsel Advice ("CCA") memoranda, and General Counsel Memoranda ("GCMs"), was searched using the IRS's full-text search function.

III. Mapping of Analogous PLRs to Solara's Eight Requested Rulings A. Ruling 1 — IRC § 721(a): Tax-Free Contribution of Portfolio Assets to the Consolidated Master Fund

1. Overview of the Ruling Requested Ruling 1 requests that the IRS confirm that the contributions by each of the four Legacy Offshore Vehicles of their respective portfolio assets to the Consolidated Master Fund LP constitute tax-free contributions under IRC § 721(a), with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). The specific contributing vehicles and their respective asset prof

Section 721(a) provides that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. The contributing Legacy Offshore Vehicles will each receive a partnership interest in the Consolidated Master Fund LP in exchange for their contributed portfolio assets. The statutory requirements for no

2. PLR 200XXXXX01 (2008) — Multi-Fund Consolidation into Master Partnership Facts. In PLR 200XXXXX01, a private equity sponsor contributed assets from three parallel fund partnerships — two domestic limited partnerships and one Cayman Islands exempted limited partnership — into a newly formed domestic master limited partnership. The aggregate assets contributed had an approximate fair market value of $4 billion and c

3. PLR 200XXXXX02 (2011) — Parallel Fund Merger into Domestic Vehicle Facts. In PLR 200XXXXX02, a real estate fund sponsor merged two Cayman Islands parallel funds into a Delaware master fund. The contributions consisted of interests in operating real estate partnerships, and the aggregate FMV of the contributed assets was approximately $2.5 billion. The two Cayman funds each received partnership interests in the Del

4. PLR 201XXXXX03 (2015) — Infrastructure Fund Restructuring Facts. In PLR 201XXXXX03, an infrastructure fund contributed interests in portfolio companies operating fiber-optic networks and data center facilities from an offshore blocker structure into a domestic partnership. The contributed assets had a built-in gain of approximately $800 million. The transaction was part of a broader restructuring designed to simpl

5. Additional PLRs (Summary Table) The following table summarizes two additional PLRs identified as relevant to Ruling 1. Full-length summaries are provided in Appendix A. Observation. Across the five PLRs identified as relevant to Ruling 1, the IRS has consistently confirmed § 721(a) nonrecognition treatment for partnership-to-partnership contributions of operating company interests in fund consolidation and reorgan

1. Overview of the Ruling Requested Ruling 2 requests that the IRS confirm that the Consolidated Master Fund LP does not constitute an "investment company" within the meaning of IRC § 721(b) and Treas. Reg. § 1.351-1(c)(1)(ii) (applied by analogy to partnership contributions under § 721(b)). Section 721(b) provides that § 721(a) shall not apply to gain realized on a transfer of property to a partnership that would be

2. PLR 200XXXXX06 (2009) — Private Equity Fund Not an Investment Company Facts. In PLR 200XXXXX06, a private equity fund contributed interests in fifteen (15) operating companies — spanning the healthcare and technology sectors — to a newly formed domestic partnership as part of a fund restructuring. The taxpayer requested a ruling that the receiving partnership was not an "investment company" within the meaning of §

3. PLR 201XXXXX07 (2014) — Venture Capital Fund Restructuring Facts. In PLR 201XXXXX07, a venture capital fund underwent a consolidation that involved the contribution of interests in twenty-two (22) early-stage and growth-stage operating companies to a newly formed partnership. The taxpayer requested a ruling under § 721(b) that the receiving partnership was not an investment company. The portfolio companies include

4. Distinguishable / Cautionary PLR PLR 200XXXXX08 (2007) — Fund of Funds Contributing Interests in Other Funds. In PLR 200XXXXX08, a fund-of-funds vehicle sought to contribute its interests in approximately thirty (30) other investment funds (including hedge funds, private equity funds, and real estate funds) to a newly formed partnership. The taxpayer requested a ruling that the receiving partnership was not an inv

1. Overview of the Ruling Requested Ruling 3 requests that the IRS confirm that IRC § 367(a) and § 367(b) do not apply to the contributions by the four Legacy Offshore Vehicles (each a foreign partnership) to the Consolidated Master Fund LP (a domestic partnership). Section 367(a) imposes gain recognition on certain transfers of property "by a United States person … to a foreign corporation," and § 367(b) addresses c

2. PLR 201XXXXX09 (2016) — Foreign Partnership Contributing Assets to Domestic Partnership Facts. In PLR 201XXXXX09, a Cayman Islands exempted limited partnership contributed a portfolio of operating company interests to a newly formed Delaware limited partnership as part of a fund consolidation transaction. The taxpayer requested a ruling that § 367(a) and § 367(b) did not apply to the contribution. The taxpayer rep

3. PLR 202XXXXX10 (2021) — Luxembourg SCSp to U.S. LP Transfer Facts. In PLR 202XXXXX10, a Luxembourg société en commandite spéciale ("SCSp") classified as a partnership for U.S. federal income tax purposes contributed assets to a U.S. limited partnership. The taxpayer requested a ruling that § 367 did not apply to the contribution. The Luxembourg SCSp had been formed under Luxembourg law as a limited partnership and

4. Note on Thin Coverage Only a small number of PLRs address the inapplicability of § 367 to partnership-to-partnership transfers. This is likely because the statutory text is clear on its face — § 367(a) and § 367(b) by their terms apply only to transfers involving corporations — and taxpayers generally do not seek PLRs on issues where the answer is textually unambiguous. The limited number of PLRs on this issue sho

1. Overview of the Ruling Requested Ruling 4 requests that the IRS confirm that the distributions by the Legacy Offshore Vehicles of their partnership interests in the Consolidated Master Fund LP to their respective LPs in Step 5 of the reorganization constitute tax-free distributions under IRC § 731(a). Section 731(a)(1) provides that in the case of a distribution by a partnership to a partner, gain shall not be rec

2. PLR 200XXXXX11 (2010) — Distribution of Partnership Interests in Liquidation Facts. In PLR 200XXXXX11, a fund partnership dissolved and distributed its interest in a successor master fund limited partnership to its limited partners as part of a fund restructuring. No cash was distributed — the only property distributed was the partnership interest in the successor master fund. The dissolving fund had previously co

3. PLR 201XXXXX12 (2018) — Multi-Vehicle Dissolution and LP Roll-Up Facts. In PLR 201XXXXX12, three parallel fund vehicles dissolved simultaneously and distributed their respective interests in a consolidated master fund to their LPs. Following the dissolutions, the LPs were re-allocated across two new feeder vehicles based on their tax status and domicile. The taxpayer represented that no cash or property other than

1. Overview of the Ruling Requested Ruling 5 (addressing § 731(c)) requests that the IRS confirm that the Consolidated Master Fund LP interests distributed to LPs in Step 5 are not "marketable securities" as defined in IRC § 731(c)(2). Section 731(c)(1)(A) provides that, for purposes of § 731(a)(1), the term "money" includes marketable securities. If the distributed Master Fund interests were treated as "marketable s

Section 731(c)(2)(A) defines "marketable securities" as "financial instruments and foreign currencies which are, as of the date of the distribution, actively traded" within the meaning of § 1092(d)(1). Under § 1092(d)(1), property is "actively traded" if "there is an established financial market for such property." The distributed Consolidated Master Fund LP interests will be newly issued, privately held interests in

2. PLR 201XXXXX13 (2019) — Distributed LP Interests Not Marketable Securities Facts. In PLR 201XXXXX13, a partnership dissolved and distributed interests in a newly formed domestic master fund LP to its partners in connection with a fund restructuring. The taxpayer requested a ruling that the distributed master fund LP interests were not "marketable securities" within the meaning of § 731(c)(2) and that the distribut

3. Cautionary Note The number of PLRs addressing § 731(c) in the private fund context is limited. Most published guidance and litigation addressing § 731(c) involves publicly traded partnership interests or interests in publicly traded REITs — contexts that are factually remote from the Solara reorganization. The thin PLR coverage in this area does not indicate adverse authority; rather, it reflects the fact that § 7

1. Overview of the Ruling Requested The second component of Ruling 5 (designated as Ruling 5 (§ 752) for purposes of this memorandum) requests that the IRS confirm that shifts in partner-level shares of the $1.34 billion in aggregate liabilities resulting from the reorganization do not trigger deemed contributions or distributions under IRC §§ 752(a) and 752(b) that would result in gain recognition under § 731. Under

2. PLR 201XXXXX14 (2013) — Liability Netting in Partnership Consolidation Facts. In PLR 201XXXXX14, two partnerships merged via contribution of assets and liabilities to a newly formed partnership. The aggregate liabilities of the two contributing partnerships were approximately $1.8 billion. The merger resulted in significant shifts in individual partners' shares of liabilities, as the liability allocation rules (in

3. PLR 202XXXXX15 (2022) — Tiered Partnership Liability Allocation Facts. In PLR 202XXXXX15, a multi-tier fund structure was reorganized, with liabilities allocated across upper-tier and lower-tier partnerships. The reorganization involved contributions of assets and liabilities from upper-tier feeder partnerships to a lower-tier master fund partnership. The taxpayer requested a ruling that the liability allocations

4. Cautionary Note The § 752 analysis is inherently and intensely fact-specific. While the favorable PLRs identified above confirm the general applicability of the Treas. Reg. § 1.752-1(f) netting rule and the tiered partnership allocation rules, the ultimate determination of whether any partner's net deemed distribution exceeds basis depends on the specific facts of each partner's situation — including each partner'

1. Overview of the Ruling Requested Ruling 6 requests that the IRS confirm that the built-in gain and loss accounts tracked under IRC § 704(c) by the Legacy Offshore Vehicles carry over to the Consolidated Master Fund LP when the portfolio assets are contributed in Steps 2 through 4, and that the Consolidated Master Fund may continue to use the remedial allocation method under Treas. Reg. § 1.704-3(d) — the method cu

Section 704(c)(1)(A) provides that income, gain, loss, and deduction with respect to property contributed to the partnership by a partner shall be shared among the partners so as to take account of the variation between the basis of the property to the partnership and its fair market value at the time of contribution. The regulations under § 704(c) provide three permissible allocation methods: the traditional method

2. PLR 200XXXXX16 (2012) — § 704(c) Carryover in Fund Restructuring Facts. In PLR 200XXXXX16, a partnership contributed properties with substantial built-in gains — approximately $600 million in the aggregate — to a newly formed partnership as part of a fund restructuring. The contributing partnership had employed the remedial allocation method under Treas. Reg. § 1.704-3(d) to allocate the built-in gain among its pa

3. PLR 201XXXXX17 (2016) — Remedial Method Continuation Post-Restructuring Facts. In PLR 201XXXXX17, a fund that used the remedial allocation method for its contributed properties restructured into a master-feeder arrangement. The fund contributed its portfolio assets to a newly formed master fund partnership and sought confirmation that the remedial method election survived the restructuring and continued to apply t