Contract analysis

I. Executive Summary This memorandum analyzes whether Solara Consolidated Master Fund LP (the "Master Fund"), a Delaware limited partnership to be formed on or about September 15, 2025, may continue to use the remedial allocation method under Treasury Regulations § 1.704-3(d) for each contributed property received from the Legacy Offshore Vehicles in the proposed five-step cross-border fund-platform reorganization (t

II. Statement of Facts A. The Solara Fund Platform Solara Digital Infrastructure LP is a Delaware limited partnership (EIN 82-4917366) that was founded on March 17, 2014. As of March 31, 2025, Solara has approximately $14.7 billion in assets under management ("AUM"). Solara's principal business is sponsoring and managing private equity funds that target investments in digital infrastructure assets, including data cen

1. Solara Digital Partners Fund IV LP — A Delaware limited partnership (EIN 85-2103748) with a fund size of $4.2 billion (vintage 2021), approximately 72% deployed as of the date of this memorandum. The general partner of Fund IV LP is Solara Digital Infrastructure GP LLC.

2. Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership (U.S. EIN 98-6241503; Cayman Islands Monetary Authority ("CIMA") registration number MF-72491), with a fund size of $1.85 billion. Fund IV-A Cayman is a parallel vehicle established for the benefit of non-U.S. investors and certain U.S. tax-exempt investors. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exe

3. Fund IV-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (U.S. EIN 98-6241571; Luxembourg Registre de Commerce et des Sociétés ("RCS") number B 248193), with a fund size of €1.15 billion (approximately $1.24 billion at a EUR/USD exchange rate of 1.08). The general partner (gérant commandité) of Fund IV-B Lux is Solara Luxembourg Management S.à r.l. (RCS B 248194). The registered office of Fund IV-

4. Solara Digital Partners Fund V LP — A Delaware limited partnership (EIN 88-3467219) with a fund size of $5.6 billion (vintage 2023), approximately 38% deployed as of the date of this memorandum. The general partner of Fund V LP is Solara Digital Infrastructure GP LLC.

5. Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership (U.S. EIN 98-7891234; CIMA registration number MF-89103), with a fund size of $2.45 billion. Fund V-A Cayman is a parallel vehicle with terms and structure substantially similar to those of Fund IV-A Cayman.

6. Fund V-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (U.S. EIN 98-7891267; RCS B 271056), with a fund size of €1.38 billion (approximately $1.49 billion at a EUR/USD exchange rate of 1.08). Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux are referred to collectively in this memorandum as the "Legacy Offshore Vehicles." Fund IV LP and Fund V LP are the domestic vehicles and ar

1. NovaBright Data Systems Inc. (a Delaware corporation; data center operator): FMV of $890 million; adjusted tax basis of $520 million; built-in gain of $370 million. NovaBright is held 60% by Fund IV-A Cayman and 40% by Fund IV LP (the domestic vehicle). Only the 60% interest held by Fund IV-A Cayman is contributed to the Master Fund in the Reorganization; accordingly, the § 704(c) BIG attributable to the Master Fu

2. Crestline Cloud Solutions LLC (a Delaware limited liability company, classified as a disregarded entity for U.S. federal income tax purposes; SaaS platform): FMV of €340 million (approximately $367 million at 1.08 EUR/USD); adjusted tax basis of €195 million (approximately $211 million); built-in gain of €145 million (approximately $156 million). Crestline is held 100% by Fund IV-B Lux.

3. Veridian Edge Computing Corp. (a Delaware corporation; edge computing infrastructure): FMV of $1.12 billion; adjusted tax basis of $780 million; built-in gain of $340 million. Veridian is held 55% by Fund V-A Cayman and 45% by Fund V LP. Only the 55% interest held by Fund V-A Cayman is contributed to the Master Fund; accordingly, the § 704(c) BIG attributable to the Master Fund contribution is $187 million (55% of

4. Thorngate Fiber Networks LP (a Delaware limited partnership; fiber-optic network operator): FMV of $670 million; adjusted tax basis of $490 million; built-in gain of $180 million. Thorngate is held 100% by Fund IV-A Cayman.

5. Helix SaaS Holdings Ltd. (a Cayman Islands exempted company; SaaS holding company): FMV of $445 million; adjusted tax basis of $310 million; built-in gain of $135 million. Helix is held 100% by Fund V-A Cayman. In addition to these five named portfolio companies, the Legacy Offshore Vehicles hold interests in 18 additional portfolio companies across the Fund IV and Fund V vehicle families (11 portfolio companies i

III. Issues Presented This memorandum addresses the following five issues:

1. Carryover of § 704(c) Accounts. Whether the § 704(c) built-in gain and loss accounts maintained by the Legacy Offshore Vehicles with respect to contributed properties carry over to the Master Fund upon the § 721(a) contributions in Steps 2 through 4 of the Reorganization.

2. Continuation of the Remedial Allocation Method. Whether the Master Fund may continue to use the remedial allocation method under Treas. Reg. § 1.704-3(d) — the same method used by the Legacy Offshore Vehicles — for each contributed property, and whether the Master Fund should affirmatively elect the remedial allocation method in its limited partnership agreement.

3. Level of Method Election and Consistency Requirements. Whether the § 704(c) method election is made at the partnership level or on a property-by-property basis, and what consistency requirements apply when properties subject to a particular method are contributed to a newly formed partnership.

4. New "Contribution" for § 704(c) Purposes. Whether the formation of a new partnership (the Master Fund) through contributions from existing partnerships creates a new "contribution" for purposes of § 704(c), and if so, what the implications are for method selection, built-in gain/loss measurement, and layered § 704(c) tracking.

5. Anti-Abuse Considerations in Tiered Structures. Whether the tiered-partnership structure created during the interim period (in which the Legacy Offshore Vehicles hold LP interests in the Master Fund prior to their dissolution in Step 5) raises additional § 704(c) considerations under Treas. Reg. § 1.704-3(a)(9) (anti-abuse rule for tiered partnerships) or Treas. Reg. § 1.704-3(a)(10) (general anti-abuse rule).

IV. Short Conclusion Based on our analysis of the applicable statutory provisions, Treasury Regulations, and relevant authorities, we reach the following conclusions with respect to each of the issues presented: First, the § 704(c) built-in gain accounts carry over to the Master Fund. The total $1.72 billion in aggregate BIG does not disappear, diminish, or reset upon the § 721(a) contributions. Under IRC § 723, the

V. Legal Analysis A. Overview of IRC § 704(c) and Its Purpose

1. Statutory Framework IRC § 704(c)(1)(A) provides the foundational rule governing the allocation of income, gain, loss, and deduction with respect to property contributed to a partnership by a partner: "Under regulations prescribed by the Secretary, 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 into account the

2. The Ceiling Rule Limitation A fundamental tension in the application of § 704(c) arises from the so-called "ceiling rule." Under Treas. Reg. § 1.704-3(b)(1), the total amount of tax items allocated to a partner with respect to a particular property cannot exceed the total partnership tax item with respect to that property. In other words, the partnership can allocate only the tax items that actually exist; it cann

3. Three Permissible Allocation Methods The Treasury Regulations under § 704(c) prescribe three permissible allocation methods, each of which represents a different approach to resolving the tension created by the ceiling rule: (a) Traditional Method (Treas. Reg. § 1.704-3(b)): Under the traditional method, the partnership makes tax allocations that follow book allocations to the maximum extent permitted by the ceili

1. Mechanics of the Remedial Method The remedial allocation method operates as follows. When the ceiling rule causes a book allocation of income, gain, loss, or deduction to a noncontributing partner to differ from the corresponding tax allocation to that partner, the partnership makes a "remedial allocation" of an appropriate tax item to the noncontributing partner equal in amount to the full book allocation (i.e.,

2. Application to Non-Depreciable Property (Equity Interests) The five named portfolio companies — NovaBright Data Systems Inc., Crestline Cloud Solutions LLC, Veridian Edge Computing Corp., Thorngate Fiber Networks LP, and Helix SaaS Holdings Ltd. — as well as the remaining 18 portfolio companies held by the Legacy Offshore Vehicles, are equity interests in operating companies. Equity interests in operating companie

1. Partnership-Level vs. Property-Level Election Under Treas. Reg. § 1.704-3(a)(2), the § 704(c) allocation method is selected on a property-by-property basis. The regulation provides that a partnership "may use different methods with respect to different items of contributed property," subject to the requirement that the method selected must be "reasonable" under the facts and circumstances. However, as a practical

2. Consistency Requirement Treas. Reg. § 1.704-3(a)(2) provides that a partnership must use a "reasonable method" that is "consistent with the purpose of section 704(c)." Once a method is adopted for a particular property, the partnership generally may not change methods without satisfying a "reasonable cause" standard. The regulations do not elaborate extensively on what constitutes "reasonable cause" for a change i

1. General Framework: Tiered Partnerships and § 704(c) Treas. Reg. § 1.704-3(a)(8) addresses the application of § 704(c) in the context of tiered partnerships. The regulation provides that when property subject to a § 704(c) allocation is contributed by a partnership (the "upper-tier partnership") to another partnership (the "lower-tier partnership"), the upper-tier partnership retains its § 704(c) allocation respons

2. Contribution by a Partnership of Property Already Subject to § 704(c) The contributions from the Legacy Offshore Vehicles to the Master Fund are themselves § 721 nonrecognition transactions. Under IRC § 721(a), no gain or loss is recognized by the Legacy Offshore Vehicles (as contributing partners) or by the Master Fund (as the recipient partnership) upon the contributions. Under IRC § 723, the Master Fund takes a

3. Preservation of Built-In Gain Amounts The aggregate built-in gain for all contributed properties at the time of contribution to the Master Fund is approximately $1.72 billion. This amount is based on preliminary FMV estimates provided by Redstone Advisory Group LLC and tax-basis records provided by Caldwell Pierce & Co. LLP. The final BIG amounts will be determined based on the FMV appraisals and tax-basis records

1. Continuation of Existing Method We believe the Master Fund should be permitted to continue using the remedial allocation method for each contributed property for the following reasons: (a) Same properties. The same properties that were subject to the remedial method in the Legacy Offshore Vehicles will be contributed to the Master Fund. No change in the underlying assets has occurred. The properties are the same e

2. Mechanics for the Master Fund To implement the continuation of the remedial method, the Master Fund should take the following steps: Partnership Agreement. The Master Fund's limited partnership agreement (the "LPA") should contain a provision specifying the remedial allocation method under Treas. Reg. § 1.704-3(d) for all properties contributed from the Legacy Offshore Vehicles. The provision should be included in

3. Interaction with IRC § 704(c)(1)(C) — Built-In Loss Limitation IRC § 704(c)(1)(C), enacted as part of the American Jobs Creation Act of 2004, imposes a limitation on the allocation of built-in losses. Under § 704(c)(1)(C), if property contributed by a partner has an adjusted tax basis in excess of its FMV at the time of contribution (i.e., a built-in loss), the built-in loss may be taken into account only in deter

1. Interaction with § 752 Liability Shifts When properties subject to liabilities are contributed to a partnership, or when a partnership assumes liabilities of a contributing partner, § 752 governs the treatment of such liabilities. Under § 752(a), an increase in a partner's share of partnership liabilities is treated as a contribution of money by such partner to the partnership. Under § 752(b), a decrease in a part

2. Interaction with § 704(c) and § 731 Distributions (Step 5) In Step 5 of the Reorganization, each Legacy Offshore Vehicle dissolves and distributes its Master Fund LP interests to its respective limited partners. These distributions are governed by IRC § 731, which generally provides for nonrecognition of gain or loss on the distribution of property (including partnership interests) by a partnership to a partner. T

3. Interaction with Reverse § 704(c) (Revaluation Events) The contributions from the Legacy Offshore Vehicles to the Master Fund are contributions under IRC § 721, not revaluation events under Treas. Reg. § 1.704-1(b)(2)(iv)(f). A revaluation event occurs when a partnership adjusts its capital accounts to reflect the FMV of partnership property, typically in connection with the admission of a new partner, the liquida

1. Books and Records The Master Fund's initial capital accounts, § 704(c) layering schedules, and property-by-property BIG tracking must be established at formation (September 15, 2025) and populated with data as contributions occur during the October 1 through November 1, 2025, contribution period. This is a substantial undertaking given the number of properties involved (23 portfolio companies), the number of contr