Contract analysis

I. Executive Summary This memorandum analyzes whether the Internal Revenue Service ("IRS") could successfully challenge the proposed five-step cross-border reorganization of Solara Digital Infrastructure LP's ("Solara" or the "Sponsor") fund platform under three judicial and regulatory anti-abuse doctrines: (1) the substance-over-form doctrine (including its codification in IRC § 7701(o)), (2) the step transaction do

II. Factual Background A. Existing Fund Structure Solara Digital Infrastructure LP is a Delaware limited partnership founded on March 17, 2014, with its principal office located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara operates as a private equity sponsor focused on digital infrastructure — specifically, data centers, fiber-optic networks, and edge computing facilities — and enterprise so

III. Legal Framework This section sets forth the legal framework for the three anti-abuse doctrines under which the IRS could potentially challenge the proposed reorganization. Each doctrine is discussed in turn. A. The Substance-Over-Form Doctrine General Principles. The substance-over-form doctrine is a longstanding judicial principle under which the IRS and the courts may disregard the legal form chosen by a taxpa

Section 7701(o)(5)(A) defines the "economic substance doctrine" as the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. Section 7701(o)(2) provides that profit potential may be considered for purposes of prong (A), but only if the present value of the reasonably expected pre-ta

IV. Analysis: Substance-Over-Form Doctrine A. Economic Substance of the Reorganization The proposed reorganization fundamentally alters Solara's economic position by consolidating four separate legal entities — organized and operating across three different jurisdictions (the Cayman Islands, Luxembourg, and, following the reorganization, the United States) — into a single master fund structure with two feeder vehicle

V. Analysis: Step Transaction Doctrine A. Application of the Three Tests

1. End Result Test The five steps of the proposed reorganization are coherently planned and documented as a coordinated reorganization with a defined target end result: the consolidation of four offshore fund vehicles into the Consolidated Master Fund LP, with the establishment of two Cayman feeder partnerships for non-U.S. and U.S. tax-exempt investors, respectively. The GP board resolution of March 14, 2025 approve

2. Interdependence Test Under the interdependence test, the key question is whether the individual steps in the reorganization are "so interdependent that the legal relations created by one transaction would have been fruitless without a completion of the series." We analyze each step below. Step 1 (Formation of New Entities). The formation of the new entities — the Master Fund GP LLC, the Consolidated Master Fund LP