Contract analysis

I. Executive Summary This memorandum analyzes the shifts in partner-level shares of partnership liabilities that will result from the proposed five-step reorganization of the Solara Digital Infrastructure LP ("Solara" or "SDILP") fund platform. The reorganization involves the consolidation of four Legacy Offshore Vehicles — Solara Digital Partners Fund IV-A (Cayman) LP, Solara Digital Partners Fund IV-B (Luxembourg)

II. Scope and Limitations This memorandum is limited in scope to an analysis of the United States federal income tax consequences of the liability shifts arising under IRC § 752 and related provisions in connection with the proposed reorganization of the Solara fund platform. The analysis addresses the deemed contribution and deemed distribution implications under IRC §§ 752(a) and 752(b), the application of the nett

III. Factual Background A. The Existing Fund Structure Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership organized on March 17, 2014, and registered with the Delaware Division of Corporations. As of March 31, 2025, Solara manages approximately $14.7 billion in assets under management ("AUM") across a family of parallel fund vehicles focused on digital infrastructure investments,

IV. Applicable Legal Framework A. IRC § 752 — Treatment of Certain Liabilities

Section 752 of the Internal Revenue Code governs the treatment of partnership liabilities and their effect on the adjusted basis of partners' interests in the partnership. The foundational premise of § 752 is that a partner's share of the liabilities of a partnership is treated as part of the partner's investment in the partnership — increases in a partner's share of liabilities are treated as contributions to the pa

1. IRC § 752(a) — Increase in Partner's Share of Liabilities

Section 752(a) provides that any increase in a partner's share of the liabilities of a partnership, or any increase in a partner's individual liabilities by reason of the assumption by the partner of partnership liabilities, "shall be considered as a contribution of money by such partner to the partnership." This deemed contribution of money increases the partner's outside basis in its partnership interest under IRC

2. IRC § 752(b) — Decrease in Partner's Share of Liabilities

Section 752(b) provides that any decrease in a partner's share of the liabilities of a partnership, or any decrease in a partner's individual liabilities by reason of the assumption by the partnership of such individual liabilities, "shall be considered as a distribution of money by the partnership to such partner." This deemed distribution of money reduces the partner's outside basis in its partnership interest unde

3. IRC § 752(c) — Definition of Liability

Section 752(c) provides that, for purposes of § 752, a liability to which property is subject shall, to the extent of the fair market value of such property, be treated as a liability of the owner of the property. This provision is relevant to the reorganization insofar as the portfolio assets being contributed to the Consolidated Master Fund may be subject to liabilities (e.g., nonrecourse debt secured by portfolio

Section 752(c) also establishes the scope of the term "liability" for § 752 purposes. While the Code does not provide an exhaustive definition, the regulations and case law have interpreted the term broadly to encompass recourse liabilities, nonrecourse liabilities, and certain contingent and assumed liabilities, subject to the special rules of Treas. Reg. § 1.752-7 for contingent liabilities (discussed in Section XI

1. Treas. Reg. § 1.752-1(a) — Classification of Liabilities Treasury Regulation § 1.752-1(a) establishes the fundamental classification of partnership liabilities into two categories: recourse liabilities and nonrecourse liabilities. This classification drives the methodology for determining each partner's share of such liabilities. Under Treas. Reg. § 1.752-1(a)(1), a partnership liability is a recourse liability to

2. Treas. Reg. § 1.752-1(f) — Netting Rule Treasury Regulation § 1.752-1(f) is the critical provision for this analysis and merits detailed discussion. Treas. Reg. § 1.752-1(f) provides as follows: "If, as the result of a single transaction, a partner incurs both an increase and a decrease in the partner's share of the liabilities of a partnership (or patnerships [sic]), only the net increase or decrease shall be tak

3. Treas. Reg. § 1.752-1(e) — Assumption of Partner's Liability Treasury Regulation § 1.752-1(e) provides that if a partnership assumes a liability of a partner (other than a § 1.752-7 liability), the partnership is treated as having satisfied the liability, resulting in a deemed distribution of money to the contributing partner under § 752(b). This provision is relevant in the reorganization because each Legacy Offs

1. Treas. Reg. § 1.752-4 — Special Rules for Tiered Partnerships Following the completion of the reorganization, the Solara fund platform will operate through a tiered partnership structure. The Consolidated Master Fund LP will serve as the lower-tier partnership, holding all portfolio assets and their associated liabilities. The International Feeder (Cayman) LP and the Tax-Exempt Feeder (Cayman) LP will serve as upp

2. Anti-Abuse Rule under Treas. Reg. § 1.752-2(j) Treasury Regulation § 1.752-2(j) provides an anti-abuse rule for recourse liabilities, under which an obligation of a partner or related person to make a payment may be disregarded if the facts and circumstances indicate that a principal purpose of the arrangement is to eliminate the partner's economic risk of loss or to create the appearance of economic risk of loss

Section 731(a)(1) provides that, in the case of a distribution by a partnership to a partner, gain shall not be recognized to the partner except to the extent that any money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution. As noted above, deemed distributions under § 752(b) are treated as distributions of money for § 731 purposes. Accordingly, th

V. Pre-Reorganization Liability Allocation Analysis A. Overview of Pre-Reorganization Liability Shares Prior to the reorganization, the $1.34 billion in aggregate portfolio-level liabilities is held across four separate partnerships — Fund IV-A Cayman, Fund IV-B Luxembourg, Fund V-A Cayman, and Fund V-B Luxembourg — each of which is a separate partnership for U.S. federal income tax purposes with its own partnership

VI. Post-Reorganization Liability Allocation Analysis A. Overview of Post-Reorganization Structure Upon completion of Steps 2 through 5 of the reorganization, all $1.34 billion in aggregate portfolio-level liabilities will be liabilities of a single partnership — the Consolidated Master Fund LP. The aggregate amount of liabilities does not change as a result of the reorganization; only the partnership in which those