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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Leonard Cross, Responsible Partner, Tax Sylvia Hartwell, Billing Partner, Tax

FROM: Robert Jansen, Lead Associate, Tax (with assistance from Garrett Simmons, Working Associate, Tax)

DATE: July 18, 2025

RE: Preparation Memorandum for Pre-Submission Conference with IRS Office of the Associate Chief Counsel (International), CC:INTL Branch 1 — July 22, 2025

CLIENT: Solara Digital Infrastructure LP

MATTER: Cross-Border Fund-Platform Reorganization — Private Letter Ruling Request

ENGAGEMENT NO.: 20250527-SDILP-PLR

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I. Purpose and Overview of This Memorandum

This memorandum serves as the firm's internal preparation document for the pre-submission conference scheduled for Tuesday, July 22, 2025, at 10:00 a.m. Eastern Time, with the Internal Revenue Service, Office of the Associate Chief Counsel (International), CC:INTL Branch 1, at the IRS's principal offices located at 1111 Constitution Avenue NW, Washington, DC 20224. The purpose of the conference is to discuss the anticipated private letter ruling ("PLR") request that Calderwood & Harkness LLP intends to submit on behalf of our client, Solara Digital Infrastructure LP, in connection with a multi-step cross-border fund-platform reorganization. This memorandum sets forth the proposed conference agenda, detailed talking points for each ruling to be requested, anticipated questions from the IRS, our proposed responses, fallback positions on each issue, and strategic guidance for the conference.

The conference was requested by letter dated June 27, 2025, from Leonard Cross to the Office of the Associate Chief Counsel (International), CC:INTL Branch 1, pursuant to Rev. Proc. 2025-1, § 10.07. The IRS acknowledged receipt of the conference request by email correspondence from Senior Technician Reviewer staff on July 3, 2025, and confirmed the July 22 date. The conference request letter identified the transaction in general terms and listed the anticipated ruling requests.

We have been advised by CC:INTL Branch 1 that representatives from CC:PSI (Passthroughs & Special Industries) may also attend the conference, given the secondary subject-matter jurisdiction that CC:PSI holds over Subchapter K issues implicated by the ruling requests. We should anticipate questions from CC:PSI personnel on the partnership tax aspects of the transaction, including the application of Sections 721, 731, 752, and 704(c), while CC:INTL personnel are likely to focus on the cross-border dimensions, including the application of Sections 367 and 1446 and issues arising under the entity classification regulations as they apply to foreign entities.

The conference will cover the eight specific rulings (plus one supplemental entity-classification confirmation) to be requested in the PLR on behalf of Solara Digital Infrastructure LP (EIN 82-4917366), through its general partner Solara Digital Infrastructure GP LLC (EIN 82-4917365). The PLR will address a proposed five-step reorganization of Solara's cross-border fund platform involving six existing fund vehicles across three jurisdictions and the formation of a consolidated master-feeder structure.

The Calderwood & Harkness attendees at the conference will be Leonard Cross (lead presenter) and Sylvia Hartwell, both of whom will appear in person at the IRS offices in Washington, DC. Robert Jansen and Garrett Simmons will be available by telephone from the firm's New York office at (212) 558-4000 in the event that questions arise during the conference requiring additional detail or research support. It is anticipated that the conference will last approximately ninety minutes to two hours.

As a reminder, IRS Form 2848, Powers of Attorney and Declaration of Representative, designating Leonard Cross and Sylvia Hartwell as the authorized representatives of Solara Digital Infrastructure LP and Solara Digital Infrastructure GP LLC before the Internal Revenue Service, have been prepared and will accompany the formal PLR submission. Executed copies of the Form 2848 should be brought to the conference for reference in the event the IRS requests confirmation of our authority to represent the taxpayer in this matter.

II. Executive Summary of the Transaction

A. The Taxpayer

Solara Digital Infrastructure LP is a Delaware limited partnership, organized and established on March 17, 2014, under the Delaware Revised Uniform Limited Partnership Act. Its principal office is located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801, and it maintains additional offices in New York, New York, and San Francisco, California. Solara's employer identification number is 82-4917366. The general partner of Solara Digital Infrastructure LP is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company.

Solara is a private equity and growth capital platform focused on digital infrastructure — encompassing data centers, fiber-optic networks, edge computing facilities, and related technology infrastructure — as well as enterprise software-as-a-service ("SaaS") businesses. As of March 31, 2025, Solara manages approximately $14.7 billion in assets under management across its various fund vehicles.

Solara was founded and is managed by Viktor Raines, who serves as Managing Partner. Other key officers of the platform include Meredith Tsao (Chief Operating Officer), Douglas Wexford (Chief Financial Officer), Priya Narasimhan (General Counsel), and Stefan Dalmqvist (Head of Tax). Our primary day-to-day client contacts on the PLR matter are Stefan Dalmqvist and Priya Narasimhan.

B. Current Fund Structure

Solara currently operates six parallel fund vehicles across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — designed to serve the distinct tax and regulatory needs of three investor pools: U.S. taxable investors, U.S. tax-exempt investors (including pension funds, endowments, and foundations), and non-U.S. investors (including sovereign wealth funds, non-U.S. pension plans, and foreign institutional investors). The six current fund vehicles that are the subject of the proposed reorganization are set forth in the table below.

Current Fund Vehicles Being Reorganized

The Fund IV series (Fund IV, Fund IV-A, and Fund IV-B) represents a 2021 vintage fund that is approximately 72% deployed as of March 31, 2025, while the Fund V series (Fund V, Fund V-A, and Fund V-B) represents a 2023 vintage fund that is approximately 38% deployed. The offshore parallel vehicles (Fund IV-A Cayman, Fund IV-B Luxembourg, Fund V-A Cayman, and Fund V-B Luxembourg) invest pari passu alongside the corresponding domestic fund vehicle in each series.

It is important to note that the two domestic vehicles — Fund IV LP and Fund V LP — are not part of the reorganization. They will continue to operate in their current form. Only the four offshore vehicles are being consolidated into the new master-feeder structure.

C. Proposed Five-Step Reorganization

The proposed reorganization contemplates a five-step process with a target effective completion date of December 1, 2025. The steps, and their target dates, are as follows:

Step 1 — Entity Formation (Target: September 15, 2025). Solara will form four new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the new master fund; (ii) Solara Consolidated Master Fund LP, a Delaware limited partnership that will serve as the master fund receiving the consolidated portfolio assets; (iii) Solara International Feeder (Cayman) LP, a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP, a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. IRS Form 8832 check-the-box elections for partnership classification will be filed for each new entity promptly following formation.

Step 2 — Fund IV-A Cayman Contribution (Target: October 1, 2025). Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund. The aggregate fair market value of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. This contribution is intended to qualify as a tax-free contribution under IRC § 721(a).

Step 3 — Fund IV-B Luxembourg Contribution (Target: October 15, 2025). Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests. The aggregate fair market value of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at the assumed 1.08 EUR/USD exchange rate), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in aggregate built-in gain of approximately €288 million (approximately $311 million). This contribution is also intended to qualify under IRC § 721(a).

Step 4 — Fund V-A Cayman and Fund V-B Luxembourg Contributions (Target: November 1, 2025). Fund V-A (Cayman) LP will contribute all of its portfolio assets (FMV approximately $2.89 billion; basis approximately $2.34 billion; BIG approximately $550 million) to the Consolidated Master Fund LP in exchange for limited partnership interests. Simultaneously, Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets (FMV approximately €1.29 billion / $1.39 billion; basis approximately €1.14 billion / $1.23 billion; BIG approximately €150 million / $162 million) to the Consolidated Master Fund LP in exchange for limited partnership interests. Both contributions are intended to qualify under IRC § 721(a).

Step 5 — Legacy Vehicle Dissolutions and LP Roll-ups (Target: December 1, 2025). Following the contributions, each of the four Legacy Offshore Vehicles will dissolve and distribute its interest in the Consolidated Master Fund LP to its respective limited partners. Non-U.S. limited partners will contribute their distributed Master Fund LP interests to the Solara International Feeder (Cayman) LP. U.S. tax-exempt limited partners will contribute their distributed Master Fund LP interests to the Solara Tax-Exempt Feeder (Cayman) LP. The distributions are intended to qualify as tax-free distributions under IRC § 731(a).

D. Aggregate Transaction Financials

The following summarizes the aggregate financial scope of the proposed reorganization:

• Total fair market value of assets transferred: approximately $7.75 billion

• Total adjusted tax basis of assets transferred: approximately $6.03 billion

• Total aggregate built-in gain: approximately $1.72 billion

• Aggregate liabilities assumed by the Consolidated Master Fund: approximately $1.34 billion (consisting of portfolio-level nonrecourse debt across all four offshore vehicles)

• Total portfolio companies across all funds: 23 operating companies (11 held through Fund IV vehicles; 12 held through Fund V vehicles)

E. Business Rationale

The reorganization is motivated by legitimate and well-documented business purposes, which are critical to our position on the anti-abuse and step transaction analyses. The key business rationale points that should be emphasized at the conference include the following:

Operational Cost Reduction. Consolidation of the four offshore vehicles into a single master-feeder structure is expected to yield approximately $3.8 million annually in reduced administrative, audit, regulatory, and compliance costs. The current structure requires separate financial statement audits, separate regulatory filings, and separate administrators for each vehicle in each jurisdiction. The master-feeder structure will reduce these to a single master fund audit and two feeder-level audits.

OECD Pillar Two GloBE Rules. The OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules became effective for Luxembourg entities beginning in fiscal year 2025. These rules diminish several of the historical benefits of utilizing Luxembourg SCSp structures as parallel fund vehicles for European and other non-U.S. investors. The proposed reorganization responds to this changed regulatory landscape by transitioning away from Luxembourg-domiciled vehicles.

FATCA and CRS Compliance Simplification. Maintaining separate parallel vehicles in multiple jurisdictions imposes duplicative FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) reporting obligations. Consolidation will streamline these compliance requirements.

Investor-Requested Governance Simplification. Solara's Limited Partner Advisory Committee ("LPAC") has expressed a preference for governance simplification and the reduction of the number of separate legal entities in the fund structure. Preliminary consent of limited partners holding 78% in interest was obtained at the LPAC meeting held on April 22, 2025.

These business rationale points are significant not only for the anti-abuse analysis but also for framing the overall narrative of the transaction for the IRS. The reorganization should be presented as a commercially motivated restructuring that happens to raise tax questions, not as a tax-motivated transaction with incidental business justification.

III. Proposed Agenda for the Conference

The following is the proposed agenda for the pre-submission conference. Timing estimates are approximate, and the actual flow of the conference will depend on the IRS's questions and areas of interest. The total estimated conference time is approximately 110 minutes (one hour and fifty minutes).

1. Introductions and Administrative Matters (approximately 5 minutes)

Leonard Cross will introduce the Calderwood & Harkness team. We will confirm the IRS personnel present, including any representatives from CC:INTL Branch 1 and CC:PSI. Administrative matters to be covered include: (a) the anticipated PLR submission date of August 15, 2025; (b) the IRS user fee of $38,000, which will be remitted by wire transfer upon submission; and (c) the penalties of perjury declaration, which will be signed by Viktor Raines in his capacity as Managing Partner of Solara Digital Infrastructure LP.

2. Overview of Taxpayer and Transaction (approximately 10 minutes)

Leonard Cross will provide a brief overview of Solara's business, fund platform, and investor base, followed by a walk-through of the proposed five-step reorganization. This presentation will be supported by the pre-prepared organizational charts and step transaction diagrams that have been drafted as PLR Exhibits A (Pre-Reorganization Organizational Chart), B (Post-Reorganization Organizational Chart), and C (Step Transaction Diagrams). Draft copies of these exhibits will be made available to the IRS attendees.

3. Ruling 1: IRC § 721(a) — Contribution of Portfolio Assets to the Master Fund (approximately 10 minutes)

Present the argument that each of the four contributions (Steps 2 through 4) qualifies for tax-free treatment under § 721(a). Discuss carryover basis under § 723 and holding period tacking under § 1223(2). Address the mechanics of partnership-to-partnership contributions.

4. Ruling 2: IRC § 721(b) — Investment Company Exception (approximately 10 minutes)

Present the argument that the Consolidated Master Fund LP does not constitute an "investment company" within the meaning of § 721(b) and Treas. Reg. § 1.351-1(c)(1)(ii). Discuss the operating company nature of the 23 portfolio companies and the absence of meaningful diversification.

5. Ruling 3: IRC § 367 — Inapplicability to Partnership-to-Partnership Transfers (approximately 15 minutes)

This ruling request is expected to receive the most intensive scrutiny from the IRS. Present the argument that §§ 367(a) and 367(b) do not apply to the contributions described in Steps 2 through 4 because, by their express statutory terms, those provisions apply only to transfers to or from corporations. Discuss the statutory text, legislative history, and absence of regulatory authority extending § 367 to partnerships. This topic is allocated the most time in the agenda due to its complexity and the expected level of IRS interest.

6. Ruling 4: IRC § 731(a) — Distribution Treatment (approximately 10 minutes)

Present the argument that the distributions in Step 5 qualify as tax-free distributions under § 731(a)(1). Discuss the interaction with the § 752 liability analysis and the step transaction doctrine.

7. Ruling 5: IRC § 731(c) — Marketable Securities Exception (approximately 5 minutes)

Present the argument that the distributed Master Fund LP interests are not "marketable securities" as defined in § 731(c)(2) and that the investment partnership exception is inapplicable.

8. Ruling 6: IRC § 752 — Liability Shifting (approximately 10 minutes)

Present the netting analysis for the $1.34 billion in aggregate liabilities assumed by the Consolidated Master Fund. Discuss the application of the netting rule under Treas. Reg. § 1.752-1(f) and the tiered partnership rules under Treas. Reg. § 1.752-4.

9. Ruling 7: IRC § 704(c) — Built-In Gain Carryover and Remedial Allocation Method (approximately 10 minutes)

Discuss the carryover of $1.72 billion in aggregate built-in gain under § 704(c), the continuation of the remedial allocation method under Treas. Reg. § 1.704-3(d), and the mechanics of tracking § 704(c) layers across tiered partnerships.

10. Ruling 8: IRC § 1446 — Withholding Analysis (approximately 5 minutes)

Present the nonrecognition / no withholding argument for both the contributions and the distributions. Address the application of § 1446(f) to partnership interest transfers.

11. Ruling 9 (Entity Classification): Treas. Reg. § 301.7701-3 (approximately 5 minutes)

Confirm the partnership classification for all three new entities (Consolidated Master Fund LP, International Feeder, and Tax-Exempt Feeder). This is expected to be a straightforward discussion.

12. IRS Feedback and Next Steps (approximately 15 minutes)

Solicit preliminary reactions from the IRS regarding the ruling requests. Identify any areas where the IRS desires additional representations, factual detail, or supporting documentation beyond what is contemplated in the current draft PLR request. Discuss the anticipated timeline for PLR processing and any possibility of expedited handling given the December 1, 2025 target effective date.

IV. Detailed Talking Points and Anticipated IRS Questions — By Ruling

This section sets forth our detailed substantive positions, supporting authorities, anticipated IRS questions and our proposed responses, and fallback positions for each of the ruling requests. These talking points are designed to equip the conference attendees with comprehensive preparation for the range of questions the IRS may raise during the pre-submission conference.

A. Ruling 1: IRC § 721(a) — Tax-Free Contribution

Our Position. The contributions by each of the four Legacy Offshore Vehicles of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund qualify as tax-free contributions under IRC § 721(a). Under that provision, no gain or loss is 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. We contend that each of the four contributions in Steps 2 through 4 satisfies this statutory requirement.

As a corollary to the § 721(a) nonrecognition treatment, the Consolidated Master Fund LP will take a carryover basis in the contributed assets under IRC § 723, equal to the adjusted basis of each asset in the hands of the contributing partnership at the time of contribution. The holding period of the contributed assets in the hands of the Master Fund will include the period during which the assets were held by the contributing partnerships, pursuant to IRC § 1223(2).

Each of the four contributing entities — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — is classified as a partnership for U.S. federal income tax purposes. The receiving entity, Consolidated Master Fund LP, will be classified as a partnership pursuant to a Form 8832 check-the-box election filed in connection with its formation. The transaction therefore involves contributions of property by partnerships to a partnership, which is the paradigmatic case for § 721(a) treatment.

The mechanics of partnership-to-partnership contributions are well-established in the Code, regulations, and published guidance. When a partnership contributes property to another partnership, the transaction is analyzed at the entity level — the contributing partnership is the "partner" contributing property to the receiving partnership. See Rev. Rul. 99-5 (addressing certain partnership formation transactions); Rev. Rul. 2004-43 (addressing contributions of § 704(c) property by a partnership to another partnership).

Key Asset Data

The following table summarizes the key financial data for each contribution:

Anticipated IRS Questions and Proposed Responses

Question 1: Whether each Legacy Offshore Vehicle is properly classified as a partnership for U.S. federal income tax purposes.

Response: Each of the four contributing vehicles has been classified and has filed as a partnership for U.S. federal income tax purposes since its formation. The two Cayman exempted limited partnerships (Fund IV-A and Fund V-A) are foreign eligible entities under Treas. Reg. § 301.7701-3 that default to partnership classification because each has two or more members and has not elected otherwise. The two Luxembourg SCSps (Fund IV-B and Fund V-B) are likewise foreign eligible entities that are treated as partnerships by default under Treas. Reg. § 301.7701-3. The employer identification numbers for each entity are as follows: Fund IV-A Cayman (EIN to be confirmed in PLR submission); Fund IV-B Luxembourg (EIN 98-6241571); Fund V-A Cayman (EIN to be confirmed in PLR submission); Fund V-B Luxembourg (EIN 98-7891267). Annual returns on Form 1065 (or appropriate informational returns) have been filed for each entity. We will include representations confirming partnership classification in the PLR request.

Question 2: Whether the contribution involves a disguised sale under § 707(a)(2)(B).

Response: The contributions do not constitute disguised sales. The contributing partnerships receive only partnership interests in the Consolidated Master Fund LP in exchange for their contributed assets. No cash or other property is distributed or transferred to the contributing partnerships in connection with the contributions, and no cash or other property is expected to be distributed to the contributing partnerships within two years of the contributions. The presumption under Treas. Reg. § 1.707-3(c)(1) — that transfers within two years of each other are treated as a disguised sale unless facts and circumstances indicate otherwise — is inapplicable because no transfer of money or other consideration runs from the Master Fund to the contributing vehicles. The transaction is motivated by the legitimate business purposes described in Section II.E above (cost reduction, GloBE compliance, FATCA/CRS simplification, governance streamlining), and not by any intent to effect a sale of assets. We will include detailed representations to this effect in the PLR request.

Question 3: Whether the multi-step nature of the transaction is integrated such that the contributions should be recharacterized under the step transaction doctrine.

Response: Each of the five steps of the reorganization has independent legal and business significance, occurs on a separate closing date (September 15, October 1, October 15, November 1, and December 1), involves distinct parties and distinct legal events (entity formations, asset contributions, and entity dissolutions, respectively), and is supported by separate closing documentation. The multi-step structure is required by practical and regulatory considerations, including the differing jurisdictions and regulatory regimes involved (Cayman Islands Monetary Authority, Luxembourg Commission de Surveillance du Secteur Financier), the need to form the receiving entities before contributions can be made, and the practical necessity of staggering contribution closings across different jurisdictions and local counsel teams. This issue is addressed in greater detail in Section V below (Overarching Anti-Abuse / Step Transaction Considerations).

Fallback Position. If the IRS is reluctant to rule on all four contributions in a single PLR, we could propose separating the ruling into sub-rulings (one per contributing vehicle) or, if necessary, submitting separate PLR requests for each contribution. However, we strongly prefer a single integrated ruling given the efficiencies of a consolidated approach, the fact that all four contributions involve a single receiving entity (the Consolidated Master Fund LP), and the fact that the legal analysis is substantively identical for each contribution. We should advocate firmly for the single ruling approach unless the IRS presents a compelling reason for separation.

B. Ruling 2: IRC § 721(b) — Investment Company Exception

Our Position. The Consolidated Master Fund LP does not constitute an "investment company" within the meaning of IRC § 721(b), and accordingly the § 721(b) exception to nonrecognition treatment does not apply to the contributions described in Steps 2 through 4. Under § 721(b), the general rule of nonrecognition under § 721(a) does not apply to gain realized on a transfer of property to a partnership that would be treated as an investment company (within the meaning of § 351) if the partnership were incorporated. The cross-reference to § 351 directs us to Treas. Reg. § 1.351-1(c)(1)(ii), which provides that a corporation (or, by extension, a partnership tested as if it were a corporation) is an "investment company" if more than 80% of the value of its assets (excluding cash and nonconvertible debt) consists of readily marketable stocks, securities, or interests in regulated investment companies.

The Consolidated Master Fund LP's portfolio consists entirely of interests in 23 operating companies in the digital infrastructure (data centers, fiber-optic networks, edge computing) and enterprise SaaS sectors. These are not "stocks, securities, or other investment assets" within the meaning of the regulation. They are substantial ownership stakes in actively managed operating businesses over which Solara exercises operational control through board representation, management agreements, and other governance mechanisms.

To illustrate the operating character of the portfolio, the following representative portfolio companies should be highlighted at the conference:

• NovaBright Data Systems Inc. — A Delaware corporation operating large-scale data center facilities in Virginia, Texas, and Oregon. The company owns and operates over 2.4 million square feet of data center capacity and employs approximately 1,200 people. FMV: $890 million; adjusted basis: $520 million. Held by Fund IV-A Cayman (60% interest).

• Crestline Cloud Solutions LLC — A Delaware limited liability company (disregarded for U.S. tax purposes) that develops and operates a cloud-based enterprise resource planning SaaS platform serving mid-market industrial customers. FMV: €340 million (approximately $367 million); adjusted basis: €195 million (approximately $211 million). Held by Fund IV-B Luxembourg (100% interest).

• Veridian Edge Computing Corp. — A Delaware corporation that designs, builds, and operates edge computing infrastructure at approximately 340 locations across the United States and Western Europe. FMV: $1.12 billion; adjusted basis: $780 million. Held by Fund V-A Cayman (55% interest).

• Thorngate Fiber Networks LP — A Delaware limited partnership that owns and operates approximately 18,000 miles of fiber-optic network infrastructure in the northeastern and southeastern United States. FMV: $670 million; adjusted basis: $490 million. Held by Fund IV-A Cayman (100% interest).

• Helix SaaS Holdings Ltd. — A Cayman Islands exempted company that serves as a holding company for a portfolio of six enterprise SaaS businesses across cybersecurity, compliance, and data analytics verticals. FMV: $445 million; adjusted basis: $310 million. Held by Fund V-A Cayman (100% interest).

In total, the 23 portfolio companies are all operating businesses; none are passive investment vehicles, holding companies for marketable securities, or regulated investment companies. The Consolidated Master Fund LP is not a vehicle for "diversification" in the sense contemplated by § 721(b); the assets being contributed by the four parallel vehicles already represent the same overall portfolio allocation, as the parallel funds invest pari passu with the corresponding domestic fund in each vintage. The contributions are consolidating identical economic exposure into a single receiving entity, not broadening or diversifying the investment portfolio.

Anticipated IRS Questions and Proposed Responses

Question 1: Whether any portfolio company interests could be characterized as "securities" under Treas. Reg. § 1.351-1(c)(1).

Response: All of Solara's portfolio company interests represent substantial ownership positions — generally majority ownership or significant minority stakes accompanied by contractual governance rights — in operating businesses over which Solara exercises active management control through board seats, management services agreements, and reserved matter consent rights. These interests are not publicly traded on any securities exchange, are subject to extensive transfer restrictions, and do not possess the characteristics of "readily marketable stocks or securities" within the meaning of the regulation. They are private equity investments in operating companies, not portfolio investments in marketable securities.

Question 2: Whether the aggregation of multiple parallel vehicles' assets results in "greater diversification" that triggers § 721(b).

Response: No meaningful diversification results from the proposed reorganization because the four contributing vehicles already invest in the same underlying portfolio companies on a pari passu basis. Fund IV-A Cayman and Fund IV-B Luxembourg hold interests in the same 11 Fund IV portfolio companies in proportions dictated by their parallel investment arrangements. Fund V-A Cayman and Fund V-B Luxembourg hold interests in the same 12 Fund V portfolio companies on the same basis. The contributions merely consolidate these parallel holdings into a single entity; they do not introduce any new assets, asset classes, or investment exposures that were not already present in each contributing vehicle's portfolio. The economic composition of each investor's indirect portfolio is unchanged by the reorganization.

Question 3: Request for detailed description of each portfolio company's operations.

Response: We will include in the PLR request a detailed appendix describing the business operations, revenue sources, employee counts, physical assets, and governance arrangements of each of the 23 portfolio companies, with particular emphasis on their operating (as opposed to investment) character. In addition, Redstone Advisory Group LLC, an independent valuation advisory firm, has prepared fair market value appraisals for each portfolio company that include an assessment of the operating nature of each company's business. We can make these appraisals available to the IRS if requested.

Fallback Position. If the IRS expresses concern about the application of § 721(b), we could offer to provide an independent third-party analysis — from either Caldwell Pierce & Co. LLP (Solara's independent accounting firm) or Redstone Advisory Group LLC (the independent valuation advisory firm) — confirming the operating nature of each of the 23 portfolio companies and the absence of any "readily marketable stocks or securities" in the portfolio. We could also offer to include additional representations in the PLR request that Solara actively manages and controls each portfolio company through board representation and other governance mechanisms, and that none of the portfolio companies is a passive investment vehicle or holds a portfolio of marketable securities as its principal asset.

C. Ruling 3: IRC § 367 — Inapplicability to Partnership-to-Partnership Transfers

Our Position. This ruling request is anticipated to be the most closely scrutinized by the IRS and is the issue on which we should be most thoroughly prepared. The ruling request seeks confirmation that IRC §§ 367(a) and 367(b) do not apply to the contributions described in Steps 2 through 4 of the proposed reorganization.

Our position is that §§ 367(a) and 367(b) are inapplicable by their express statutory terms because those provisions apply only to transfers to or from corporations, and neither the transferors nor the transferee in the proposed transaction is a corporation.

Section 367(a) provides that, in the case of any exchange described in § 332, § 351, § 354, § 355, § 356, or § 361, if a United States person transfers property to a foreign corporation, such foreign corporation shall not be considered a corporation for purposes of determining the extent to which gain shall be recognized on such transfer. By its express terms, § 367(a) requires a transfer "to a foreign corporation." In the proposed transaction, the transferee is the Consolidated Master Fund LP, a Delaware limited partnership classified as a domestic partnership for U.S. federal income tax purposes. The Master Fund is not a corporation, whether foreign or domestic. Section 367(a) is therefore inapplicable on its face.

Section 367(b) provides that, in the case of any exchange described in § 332, § 351, § 354, § 355, § 356, or § 361 in connection with which there is no transfer of property described in § 367(a)(1), an amount shall be included in the income of certain United States persons under regulations prescribed by the Secretary. Section 367(b) applies to exchanges involving "a foreign corporation." Here, neither the transferors (foreign partnerships) nor the transferee (a domestic partnership) is a corporation. Section 367(b) is therefore inapplicable.

The legislative history of § 367 confirms that the provision was designed to prevent the deferral or avoidance of U.S. tax through the use of foreign corporations. The Tax Reform Act of 1976 and the Deficit Reduction Act of 1984, which enacted the modern version of § 367, focused on the corporate context — the concern was that U.S. persons could transfer appreciated assets to foreign corporations and indefinitely defer U.S. tax on the built-in gain. That policy concern does not apply with equal force to partnership structures, which are transparent for U.S. tax purposes and in which partners are currently taxable on their allocable shares of partnership income.

No published guidance — whether in the form of regulations, revenue rulings, revenue procedures, notices, or announcements — extends § 367 to partnership-to-partnership transfers. While Treasury and the IRS have broad regulatory authority under both §§ 367(a) and 367(b), that authority has been exercised exclusively in the corporate context.

This ruling request is critical because the proposed reorganization involves cross-border asset movements with significant aggregate built-in gain — approximately $1.72 billion. The IRS may be concerned that the movement of assets from foreign partnerships to a domestic partnership could be used to repatriate appreciated assets without gain recognition. Our response to this concern is that the built-in gain is fully preserved through the § 704(c) regime (Ruling 7) and will be recognized by the relevant partners — including non-U.S. partners — upon the eventual disposition of the contributed assets. The partnership tax system, through §§ 704(c) and 1446, provides its own mechanism for ensuring that the U.S. taxing jurisdiction is not lost through the reorganization.

Anticipated IRS Questions and Proposed Responses

Question 1: Whether the IRS should look through the contributing foreign partnerships to their non-U.S. partners and apply § 367 at the partner level.

Response: Section 367 does not apply at the partner level to a contribution made by a partnership. It is the partnership, not the individual partners, that is the transferor of the contributed assets. The partnership is the entity that makes the contribution and that receives the Master Fund LP interests in exchange. While Subchapter K employs both aggregate and entity theories of partnerships depending on the context, the statutory language of § 367 requires a transfer by "a United States person" to "a foreign corporation" (§ 367(a)) or an exchange involving "a foreign corporation" (§ 367(b)). Neither condition is met here, whether the analysis is conducted at the partnership entity level or the partner level. At the partner level, the non-U.S. partners are not themselves making a transfer of property to a foreign corporation — they are indirect partners in a domestic partnership (the Consolidated Master Fund LP) that received property from other partnerships. The aggregate theory of partnerships does not override the statutory language of § 367, which specifically requires a "corporation" as transferor or transferee.

Question 2: Whether § 367 applies by analogy or under the anti-abuse rule.

Response: Section 367 is a specific statutory provision with defined triggering conditions — it requires a "corporation" as either the transferor or the transferee. The IRS cannot expand the reach of § 367 to partnerships by analogy absent explicit statutory authority or a promulgated regulation extending the provision to partnership transactions. The anti-abuse rule of Treas. Reg. § 1.701-2 is a general Subchapter K provision and is not a substitute for the specific statutory requirements of § 367. The anti-abuse analysis is addressed separately under Section V of this memorandum. We believe the anti-abuse rule is inapplicable because the transaction has substantial business purpose and the tax results are consistent with the intent of Subchapter K.

Question 3: Whether there is any gain recognition event under Subchapter K that effectively serves the § 367 policy.

Response: Yes. The § 367 policy of preventing permanent escape from U.S. taxing jurisdiction over built-in gain is fully served by the Subchapter K rules that apply to the reorganization. Specifically: (i) the $1.72 billion in aggregate built-in gain is preserved through § 704(c) accounts that carry over from the contributing vehicles to the Consolidated Master Fund LP (see Ruling 7); (ii) when the contributed properties are eventually sold or otherwise disposed of by the Master Fund, the built-in gain will be allocated to the contributing partners (or their successors) under § 704(c), ensuring that the gain is recognized by the appropriate parties; and (iii) to the extent any recognized gain constitutes effectively connected taxable income allocable to non-U.S. partners, withholding under § 1446 will apply. The § 704(c) overlay and the § 1446 withholding regime collectively serve the policy objectives of § 367 without requiring § 367 itself to apply to a partnership transaction.

Question 4: The Luxembourg SCSp transfers (Steps 3 and 4) specifically — whether the Luxembourg entities are properly classified as partnerships and not as associations taxable as corporations.

Response: Luxembourg sociétés en commandite spéciale (SCSps) are eligible entities under Treas. Reg. § 301.7701-3 and have elected or defaulted to partnership classification for U.S. federal income tax purposes. The two Luxembourg SCSps in the reorganization have been filing as partnerships since their respective formations. Their EINs are: Fund IV-B (Luxembourg) SCSp: EIN 98-6241571; Fund V-B (Luxembourg) SCSp: EIN 98-7891267. Their Luxembourg Registre de Commerce et des Sociétés (RCS) numbers are B 248193 and B 271056, respectively. Under Luxembourg law, an SCSp is a limited partnership without legal personality that is contractual in nature and is transparent for Luxembourg tax purposes. Under the default classification rules of Treas. Reg. § 301.7701-3(b)(2), a foreign eligible entity with two or more members that is not a per se corporation under Treas. Reg. § 301.7701-2(b)(8) is classified as a partnership. The Luxembourg SCSp is not listed as a per se corporation in Treas. Reg. § 301.7701-2(b)(8)(i). We will include detailed representations regarding the entity classification of the Luxembourg SCSps in the PLR request.

Fallback Position. If the IRS declines to issue an affirmative ruling that § 367 does not apply to the partnership-to-partnership contributions, we have several alternative approaches that should be considered in the following order of preference:

First, we could propose that the IRS issue a no-rule position on the § 367 question accompanied by a favorable "no adverse consequences" statement — i.e., a statement that the IRS will not challenge the taxpayer's position that § 367 does not apply, without affirmatively ruling on the issue. This approach has precedent in other complex PLRs involving novel issues.

Second, we could alternatively propose a ruling that even if § 367 were to apply in some theoretical sense, no gain recognition would result because the transfer is to a domestic (not foreign) entity. Section 367(a) only triggers gain on outbound transfers — i.e., transfers of property by a U.S. person to a foreign corporation. The proposed contributions are effectively inbound transfers (assets moving from foreign partnerships to a domestic partnership), which are the opposite of the pattern § 367(a) was designed to address.

Third, if the IRS asserts that gain recognition is required under any theory, we should request that such recognition be limited to the amount of built-in gain that would otherwise escape U.S. taxing jurisdiction (i.e., gain allocable to non-U.S. partners in non-treaty positions) and that recognition be deferred under a closing agreement, installment treatment under § 453, or similar mechanism. This is the least preferred outcome and should be resisted vigorously.

The § 367 ruling is the single most important ruling request from a risk perspective, and a no-rule on this issue would be problematic for the client. We should press firmly for an affirmative ruling during the conference.

D. Ruling 4: IRC § 731(a) — Distribution Treatment (Step 5)

Our Position. The distributions by the Legacy Offshore Vehicles of their partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 of the reorganization constitute tax-free distributions under IRC § 731(a)(1). Under that provision, in the case of a distribution by a partnership to a partner, gain shall not be recognized to such partner except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution.

In Step 5, each of the four Legacy Offshore Vehicles will dissolve and distribute its sole remaining asset — its limited partnership interest in the Consolidated Master Fund LP — to its respective limited partners in liquidation. No gain is recognized because the limited partners receive only partnership interests in the Master Fund (i.e., "property other than money"), and the fair market value of the distributed interest does not exceed any limited partner's outside basis in its partnership interest in the distributing vehicle.

No limited partner receives "money" in excess of its adjusted basis in its partnership interest. The distributions are liquidating distributions (the Legacy Offshore Vehicles dissolve following the distributions), and accordingly the analysis proceeds under § 731(a)(2). Under that provision, no loss shall be recognized to a distributee partner on a liquidating distribution unless the partner receives only money, unrealized receivables, and inventory. Here, the distributed property consists of Master Fund LP interests, which are none of the foregoing categories. Accordingly, no loss recognition results.

Anticipated IRS Questions and Proposed Responses

Question 1: Whether any LP's outside basis is exceeded by deemed money distributions arising from liability shifts under § 752(b).

Response: This question is addressed in detail under Ruling 6 (IRC § 752 — Liability Shifting). The netting analysis under Treas. Reg. § 1.752-1(f), as applied to the reorganization, demonstrates that no limited partner experiences a net deemed distribution of money (arising from decreases in its share of partnership liabilities) in excess of its adjusted basis in its partnership interest. The liability allocation modeling contained in PLR Exhibit E supports this conclusion for each class of investor (U.S. taxable, U.S. tax-exempt, and non-U.S.).

Question 2: Whether the distributions should be collapsed with the contributions (Steps 2–4) under the step transaction doctrine.

Response: Each step has independent business substance and occurs on a separate date. The distributions in Step 5 (December 1, 2025) occur approximately two months after the initial contribution in Step 2 (October 1, 2025). The contributions and distributions involve different parties: the contributions are made by the Legacy Offshore Vehicles (as contributing entities) to the Master Fund (as receiving entity), while the distributions are made by the Legacy Offshore Vehicles (as distributing entities) to their individual limited partners (as distributee partners). The parties on each side of the contributions and distributions are different, which weighs against collapsing the steps. Moreover, there is no circular flow of property or cash — assets move from the contributing vehicles to the Master Fund, and Master Fund interests move from the contributing vehicles to the limited partners. The end result is a straightforward consolidation, not a disguised exchange or circular transaction.

Fallback Position. If the IRS challenges § 731(a) treatment for specific limited partners with low outside bases — for example, limited partners that have received prior distributions that reduced their bases to nominal amounts — we could propose representations limiting the ruling to limited partners whose adjusted outside basis exceeds any deemed money distribution resulting from § 752(b) liability shifts. This would preserve the ruling for the vast majority of limited partners while carving out any edge cases.

E. Ruling 5: IRC § 731(c) — Marketable Securities Exception

Our Position. IRC § 731(c) does not apply to the distributions in Step 5 because the distributed interests — limited partnership interests in the Consolidated Master Fund LP — are not "marketable securities" as defined in IRC § 731(c)(2). Under § 731(c)(1), a distribution of marketable securities by a partnership to a partner is treated as a distribution of money, potentially triggering gain recognition under § 731(a)(1). However, this provision applies only to securities that meet the definition of "marketable securities" in § 731(c)(2).

Section 731(c)(2) defines "marketable securities" as financial instruments (including stocks, bonds, notes, debentures, and partnership interests) that are "actively traded" within the meaning of § 1092(d)(1) — i.e., actively traded on an established securities market. The Consolidated Master Fund LP interests are not actively traded on any established securities market. They are privately held, illiquid limited partnership interests subject to extensive transfer restrictions, including a prohibition on public trading, customary ROFR and ROFO provisions, and limitations on admitting substitute limited partners without general partner consent.

Moreover, the interests are not "readily tradable on a secondary market (or the substantial equivalent thereof)" within the meaning of § 731(c)(2)(B). There is no organized secondary market for these interests, and Solara does not intend to create or facilitate one.

In addition, the safe harbor exceptions under § 731(c)(3) provide further protection. The "investment partnership" exception under § 731(c)(3)(A)(iii) does not apply to trigger § 731(c) because the Master Fund is not an "investment partnership" as defined in § 731(c)(3)(C). An "investment partnership" is a partnership that has never been engaged in a trade or business and substantially all of whose assets consist of certain specified financial instruments (money, stock, notes, bonds, and similar items). The Master Fund's assets consist of operating company interests in digital infrastructure and SaaS businesses — not financial instruments. Accordingly, the investment partnership definition is not met, and the § 731(c)(3)(A)(iii) exception from the exception does not apply.

Anticipated IRS Questions and Proposed Responses

Question 1: Whether LP interests could become "marketable" through secondary market transactions.

Response: The Master Fund LP agreement will contain transfer restrictions that prohibit public trading of interests and prevent the interests from being treated as "readily tradable on a secondary market (or the substantial equivalent thereof)." Specifically, the LPA will include: (a) a prohibition on transfers that would cause the Master Fund to be treated as a "publicly traded partnership" within the meaning of § 7704; (b) a requirement for GP consent before any transfer; (c) customary right-of-first-refusal provisions; and (d) a representation by each transferee that it is not acquiring the interest on or through a public securities exchange or secondary market. There is currently no established secondary market for these interests, and Solara has no intention of creating or facilitating such a market.

Question 2: Whether the investment partnership exception under § 731(c)(3)(A)(iii) applies.

Response: The Master Fund is not an "investment partnership" as defined in § 731(c)(3)(C) because substantially all of its assets consist of operating company interests (equity stakes in digital infrastructure and enterprise SaaS businesses), not "stocks, bonds, notes, or similar financial instruments." The operating companies are actively managed businesses with employees, physical assets, customer relationships, and revenue-generating operations. They are not passive portfolio investments in traded securities.

Fallback Position. If the IRS insists that § 731(c) might apply to the distributed interests, we could offer to include in the PLR request a representation that the Master Fund will never permit public trading of its limited partnership interests on an established securities market and will include appropriate transfer restrictions in the limited partnership agreement to ensure that the interests cannot meet the definition of "marketable securities" under § 731(c)(2). We could also offer to include a representation that the Master Fund will comply with the safe harbor provisions of Treas. Reg. § 1.7704-1 (relating to interests not treated as readily tradable).

F. Ruling 6: IRC § 752 — Liability Shifting

Our Position. The aggregate liabilities assumed by the Consolidated Master Fund LP in connection with the reorganization total approximately $1.34 billion, consisting of portfolio-level debt (primarily subscription credit facilities and acquisition financing) across all four Legacy Offshore Vehicles. The shifts in partner-level shares of liabilities resulting from the reorganization do not trigger deemed contributions or distributions under IRC §§ 752(a) and 752(b) that result in gain recognition under § 731.

Under § 752(a), any increase in a partner's share of partnership liabilities is considered a contribution of money by such partner to the partnership. Under § 752(b), any decrease in a partner's share of partnership liabilities is considered a distribution of money by the partnership to such partner. Where the reorganization simultaneously causes both increases and decreases in a partner's share of liabilities — as is inevitable in a multi-vehicle consolidation — the netting rule of Treas. Reg. § 1.752-1(f) applies.

The netting rule provides that if, as the result of a single transaction, a partner's share of partnership liabilities increases and decreases, only the net increase or decrease is treated as a contribution or distribution under §§ 752(a) and 752(b). We contend that the five-step reorganization constitutes a "single transaction" for purposes of Treas. Reg. § 1.752-1(f) because it is carried out pursuant to a single integrated plan, is approved as a unified reorganization by the GP and LPAC, and results in a single consolidated structure. Under the netting approach, the net change in each partner's share of liabilities is calculated, and only the net amount is treated as a deemed contribution or distribution.

The tiered partnership rules under Treas. Reg. § 1.752-4 are also implicated by the post-reorganization structure, because the feeder vehicles (International Feeder and Tax-Exempt Feeder) will invest into the Master Fund, creating a multi-tier partnership structure. Under § 1.752-4(a), a partner's share of the liabilities of a lower-tier partnership is determined in accordance with the partner's interest in the lower-tier partnership. We have modeled the tiered partnership liability allocation in PLR Exhibit E.

Detailed liability allocation modeling (PLR Exhibit E) shows pre-reorganization and post-reorganization allocations for each partner and each liability tranche. The modeling demonstrates that no limited partner experiences a net deemed distribution under § 752(b) that would produce gain under § 731(a)(1).

Anticipated IRS Questions and Proposed Responses

Question 1: Whether the IRS accepts the netting approach under Treas. Reg. § 1.752-1(f) for this type of multi-step reorganization.

Response: The netting rule of Treas. Reg. § 1.752-1(f) is well-established and has been applied in analogous private letter rulings involving partnership reorganizations and consolidations. The key requirement is that the increases and decreases in liability shares occur "as part of a single transaction." Our five-step reorganization qualifies as a single integrated plan: it was conceived as a unified reorganization, approved as such by the GP board on March 14, 2025, and by the LPAC (with 78% consent in interest) on April 22, 2025. All five steps are part of a single reorganization plan with a single set of transaction documents. The fact that the steps are scheduled on different dates for practical and regulatory reasons does not prevent the transaction from being treated as a "single transaction" for netting purposes; the regulation does not require that all events occur simultaneously.

Question 2: The allocation of recourse vs. nonrecourse liabilities.

Response: All $1.34 billion in portfolio-level debt that will be assumed by the Consolidated Master Fund LP is nonrecourse debt at the partnership level. No partner or related person bears the economic risk of loss with respect to any of these liabilities within the meaning of Treas. Reg. § 1.752-2. Accordingly, the liabilities are allocated under the three-tier allocation rules for nonrecourse liabilities set forth in Treas. Reg. § 1.752-3: (i) first, in accordance with each partner's share of partnership minimum gain under § 1.704-2; (ii) second, in accordance with each partner's share of § 704(c) minimum gain; and (iii) third, in accordance with each partner's interest in partnership profits (the "excess nonrecourse liabilities" tier). We will provide detailed schedules showing the allocation of each liability tranche under each of the three tiers in PLR Exhibit E.

Question 3: Impact on specific LPs, particularly U.S. tax-exempt investors and non-U.S. investors.

Response: The liability shifts for each representative investor class (U.S. taxable, U.S. tax-exempt, and non-U.S.) have been modeled in PLR Exhibit E. The modeling demonstrates that no limited partner in any investor class experiences a net decrease in its share of liabilities that would produce a deemed distribution under § 752(b) in excess of the partner's adjusted outside basis. The reason is that the consolidation of the four offshore vehicles into a single Master Fund does not fundamentally change the economic arrangement — each limited partner's proportionate interest in the underlying portfolio (and the associated liabilities) remains substantially unchanged. The netting effect ensures that the modest increases and decreases in liability shares resulting from the change in partnership structure cancel out or produce only de minimis net changes.

Fallback Position. If the IRS identifies specific limited partners for whom the netting analysis creates a net deemed distribution that would produce gain, we could propose one or more of the following remedies: (a) excluding those specific limited partners from the scope of the ruling; (b) restructuring the liability assumption to avoid the issue — for example, by having specific liabilities assumed in a different sequence or by conducting a pre-reorganization capital call to retire certain debt tranches before the contributions; or (c) providing additional representations that the identified limited partners have sufficient outside basis to absorb any net deemed distribution. Approach (b) would require coordination with Solara's finance team (Douglas Wexford, CFO) and the relevant lenders, and may have commercial implications that the client would need to evaluate.

G. Ruling 7: IRC § 704(c) — Built-In Gain Carryover and Remedial Allocation Method

Our Position. The built-in gain and loss accounts tracked under IRC § 704(c) by each of the four Legacy Offshore Vehicles carry over to the Consolidated Master Fund LP with respect to each property contributed in Steps 2 through 4. This carryover is required by the principles of § 704(c), which mandate that allocations take into account the difference between the adjusted tax basis and the fair market value of contributed property at the time of contribution. When a partnership (the contributing vehicle) contributes property with existing § 704(c) built-in gain to another partnership (the Master Fund), the § 704(c) accounts carry over to the receiving partnership — the Master Fund steps into the shoes of the contributing partnership with respect to those accounts.

The total aggregate built-in gain that will carry over is approximately $1.72 billion. The key individual property built-in gain amounts are as follows:

In addition to the carryover of § 704(c) accounts, the Consolidated Master Fund LP may continue to use the remedial allocation method under Treas. Reg. § 1.704-3(d) for each contributed property. The remedial allocation method is the § 704(c) allocation method currently used by each of the Legacy Offshore Vehicles for their portfolio company interests. Under the remedial method, when the book value of contributed property is recovered more quickly than its tax basis (or vice versa), the receiving partnership creates offsetting remedial allocations of income, gain, loss, or deduction to the contributing and non-contributing partners, ensuring that the noncontributing partners are not disadvantaged by the pre-contribution built-in gain or loss.

Rev. Rul. 2004-43 and its progeny support the carryover of § 704(c) accounts in partnership-to-partnership contributions. In that rul

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Leonard Cross, Responsible Partner, Tax Sylvia Hartwell, Billing Partner, Tax
FROM: Robert Jansen, Lead Associate, Tax (with assistance from Garrett Simmons, Working Associate, Tax)
DATE: July 18, 2025
RE: Preparation Memorandum for Pre-Submission Conference with IRS Office of the Associate Chief Counsel (International), CC:INTL Branch 1 — July 22, 2025
CLIENT: Solara Digital Infrastructure LP
MATTER: Cross-Border Fund-Platform Reorganization — Private Letter Ruling Request
ENGAGEMENT NO.: 20250527-SDILP-PLR
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I. Purpose and Overview of This Memorandum
This memorandum serves as the firm's internal preparation document for the pre-submission conference scheduled for Tuesday, July 22, 2025, at 10:00 a.m. Eastern Time, with the Internal Revenue Service, Office of the Associate Chief Counsel (International), CC:INTL Branch 1, at the IRS's principal offices located at 1111 Constitution Avenue NW, Washington, DC 20224. The purpose of the conference is to discuss the anticipated private letter ruling ("PLR") request that Calderwood & Harkness LLP intends to submit on behalf of our client, Solara Digital Infrastructure LP, in connection with a multi-step cross-border fund-platform reorganization. This memorandum sets forth the proposed conference agenda, detailed talking points for each ruling to be requested, anticipated questions from the IRS, our proposed responses, fallback positions on each issue, and strategic guidance for the conference.
The conference was requested by letter dated June 27, 2025, from Leonard Cross to the Office of the Associate Chief Counsel (International), CC:INTL Branch 1, pursuant to Rev. Proc. 2025-1, § 10.07. The IRS acknowledged receipt of the conference request by email correspondence from Senior Technician Reviewer staff on July 3, 2025, and confirmed the July 22 date. The conference request letter identified the transaction in general terms and listed the anticipated ruling requests.
We have been advised by CC:INTL Branch 1 that representatives from CC:PSI (Passthroughs & Special Industries) may also attend the conference, given the secondary subject-matter jurisdiction that CC:PSI holds over Subchapter K issues implicated by the ruling requests. We should anticipate questions from CC:PSI personnel on the partnership tax aspects of the transaction, including the application of Sections 721, 731, 752, and 704(c), while CC:INTL personnel are likely to focus on the cross-border dimensions, including the application of Sections 367 and 1446 and issues arising under the entity classification regulations as they apply to foreign entities.
The conference will cover the eight specific rulings (plus one supplemental entity-classification confirmation) to be requested in the PLR on behalf of Solara Digital Infrastructure LP (EIN 82-4917366), through its general partner Solara Digital Infrastructure GP LLC (EIN 82-4917365). The PLR will address a proposed five-step reorganization of Solara's cross-border fund platform involving six existing fund vehicles across three jurisdictions and the formation of a consolidated master-feeder structure.
The Calderwood & Harkness attendees at the conference will be Leonard Cross (lead presenter) and Sylvia Hartwell, both of whom will appear in person at the IRS offices in Washington, DC. Robert Jansen and Garrett Simmons will be available by telephone from the firm's New York office at (212) 558-4000 in the event that questions arise during the conference requiring additional detail or research support. It is anticipated that the conference will last approximately ninety minutes to two hours.
As a reminder, IRS Form 2848, Powers of Attorney and Declaration of Representative, designating Leonard Cross and Sylvia Hartwell as the authorized representatives of Solara Digital Infrastructure LP and Solara Digital Infrastructure GP LLC before the Internal Revenue Service, have been prepared and will accompany the formal PLR submission. Executed copies of the Form 2848 should be brought to the conference for reference in the event the IRS requests confirmation of our authority to represent the taxpayer in this matter.
II. Executive Summary of the Transaction
A. The Taxpayer
Solara Digital Infrastructure LP is a Delaware limited partnership, organized and established on March 17, 2014, under the Delaware Revised Uniform Limited Partnership Act. Its principal office is located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801, and it maintains additional offices in New York, New York, and San Francisco, California. Solara's employer identification number is 82-4917366. The general partner of Solara Digital Infrastructure LP is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company.
Solara is a private equity and growth capital platform focused on digital infrastructure — encompassing data centers, fiber-optic networks, edge computing facilities, and related technology infrastructure — as well as enterprise software-as-a-service ("SaaS") businesses. As of March 31, 2025, Solara manages approximately $14.7 billion in assets under management across its various fund vehicles.
Solara was founded and is managed by Viktor Raines, who serves as Managing Partner. Other key officers of the platform include Meredith Tsao (Chief Operating Officer), Douglas Wexford (Chief Financial Officer), Priya Narasimhan (General Counsel), and Stefan Dalmqvist (Head of Tax). Our primary day-to-day client contacts on the PLR matter are Stefan Dalmqvist and Priya Narasimhan.
B. Current Fund Structure
Solara currently operates six parallel fund vehicles across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — designed to serve the distinct tax and regulatory needs of three investor pools: U.S. taxable investors, U.S. tax-exempt investors (including pension funds, endowments, and foundations), and non-U.S. investors (including sovereign wealth funds, non-U.S. pension plans, and foreign institutional investors). The six current fund vehicles that are the subject of the proposed reorganization are set forth in the table below.
Current Fund Vehicles Being Reorganized
The Fund IV series (Fund IV, Fund IV-A, and Fund IV-B) represents a 2021 vintage fund that is approximately 72% deployed as of March 31, 2025, while the Fund V series (Fund V, Fund V-A, and Fund V-B) represents a 2023 vintage fund that is approximately 38% deployed. The offshore parallel vehicles (Fund IV-A Cayman, Fund IV-B Luxembourg, Fund V-A Cayman, and Fund V-B Luxembourg) invest pari passu alongside the corresponding domestic fund vehicle in each series.
It is important to note that the two domestic vehicles — Fund IV LP and Fund V LP — are not part of the reorganization. They will continue to operate in their current form. Only the four offshore vehicles are being consolidated into the new master-feeder structure.
C. Proposed Five-Step Reorganization
The proposed reorganization contemplates a five-step process with a target effective completion date of December 1, 2025. The steps, and their target dates, are as follows:
Step 1 — Entity Formation (Target: September 15, 2025). Solara will form four new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the new master fund; (ii) Solara Consolidated Master Fund LP, a Delaware limited partnership that will serve as the master fund receiving the consolidated portfolio assets; (iii) Solara International Feeder (Cayman) LP, a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP, a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. IRS Form 8832 check-the-box elections for partnership classification will be filed for each new entity promptly following formation.
Step 2 — Fund IV-A Cayman Contribution (Target: October 1, 2025). Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund. The aggregate fair market value of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. This contribution is intended to qualify as a tax-free contribution under IRC § 721(a).
Step 3 — Fund IV-B Luxembourg Contribution (Target: October 15, 2025). Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests. The aggregate fair market value of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at the assumed 1.08 EUR/USD exchange rate), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in aggregate built-in gain of approximately €288 million (approximately $311 million). This contribution is also intended to qualify under IRC § 721(a).
Step 4 — Fund V-A Cayman and Fund V-B Luxembourg Contributions (Target: November 1, 2025). Fund V-A (Cayman) LP will contribute all of its portfolio assets (FMV approximately $2.89 billion; basis approximately $2.34 billion; BIG approximately $550 million) to the Consolidated Master Fund LP in exchange for limited partnership interests. Simultaneously, Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets (FMV approximately €1.29 billion / $1.39 billion; basis approximately €1.14 billion / $1.23 billion; BIG approximately €150 million / $162 million) to the Consolidated Master Fund LP in exchange for limited partnership interests. Both contributions are intended to qualify under IRC § 721(a).
Step 5 — Legacy Vehicle Dissolutions and LP Roll-ups (Target: December 1, 2025). Following the contributions, each of the four Legacy Offshore Vehicles will dissolve and distribute its interest in the Consolidated Master Fund LP to its respective limited partners. Non-U.S. limited partners will contribute their distributed Master Fund LP interests to the Solara International Feeder (Cayman) LP. U.S. tax-exempt limited partners will contribute their distributed Master Fund LP interests to the Solara Tax-Exempt Feeder (Cayman) LP. The distributions are intended to qualify as tax-free distributions under IRC § 731(a).
D. Aggregate Transaction Financials
The following summarizes the aggregate financial scope of the proposed reorganization:
• Total fair market value of assets transferred: approximately $7.75 billion
• Total adjusted tax basis of assets transferred: approximately $6.03 billion
• Total aggregate built-in gain: approximately $1.72 billion
• Aggregate liabilities assumed by the Consolidated Master Fund: approximately $1.34 billion (consisting of portfolio-level nonrecourse debt across all four offshore vehicles)
• Total portfolio companies across all funds: 23 operating companies (11 held through Fund IV vehicles; 12 held through Fund V vehicles)
E. Business Rationale
The reorganization is motivated by legitimate and well-documented business purposes, which are critical to our position on the anti-abuse and step transaction analyses. The key business rationale points that should be emphasized at the conference include the following:
Operational Cost Reduction. Consolidation of the four offshore vehicles into a single master-feeder structure is expected to yield approximately $3.8 million annually in reduced administrative, audit, regulatory, and compliance costs. The current structure requires separate financial statement audits, separate regulatory filings, and separate administrators for each vehicle in each jurisdiction. The master-feeder structure will reduce these to a single master fund audit and two feeder-level audits.
OECD Pillar Two GloBE Rules. The OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules became effective for Luxembourg entities beginning in fiscal year 2025. These rules diminish several of the historical benefits of utilizing Luxembourg SCSp structures as parallel fund vehicles for European and other non-U.S. investors. The proposed reorganization responds to this changed regulatory landscape by transitioning away from Luxembourg-domiciled vehicles.
FATCA and CRS Compliance Simplification. Maintaining separate parallel vehicles in multiple jurisdictions imposes duplicative FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) reporting obligations. Consolidation will streamline these compliance requirements.
Investor-Requested Governance Simplification. Solara's Limited Partner Advisory Committee ("LPAC") has expressed a preference for governance simplification and the reduction of the number of separate legal entities in the fund structure. Preliminary consent of limited partners holding 78% in interest was obtained at the LPAC meeting held on April 22, 2025.
These business rationale points are significant not only for the anti-abuse analysis but also for framing the overall narrative of the transaction for the IRS. The reorganization should be presented as a commercially motivated restructuring that happens to raise tax questions, not as a tax-motivated transaction with incidental business justification.
III. Proposed Agenda for the Conference
The following is the proposed agenda for the pre-submission conference. Timing estimates are approximate, and the actual flow of the conference will depend on the IRS's questions and areas of interest. The total estimated conference time is approximately 110 minutes (one hour and fifty minutes).
1. Introductions and Administrative Matters (approximately 5 minutes)
Leonard Cross will introduce the Calderwood & Harkness team. We will confirm the IRS personnel present, including any representatives from CC:INTL Branch 1 and CC:PSI. Administrative matters to be covered include: (a) the anticipated PLR submission date of August 15, 2025; (b) the IRS user fee of $38,000, which will be remitted by wire transfer upon submission; and (c) the penalties of perjury declaration, which will be signed by Viktor Raines in his capacity as Managing Partner of Solara Digital Infrastructure LP.
2. Overview of Taxpayer and Transaction (approximately 10 minutes)
Leonard Cross will provide a brief overview of Solara's business, fund platform, and investor base, followed by a walk-through of the proposed five-step reorganization. This presentation will be supported by the pre-prepared organizational charts and step transaction diagrams that have been drafted as PLR Exhibits A (Pre-Reorganization Organizational Chart), B (Post-Reorganization Organizational Chart), and C (Step Transaction Diagrams). Draft copies of these exhibits will be made available to the IRS attendees.
3. Ruling 1: IRC § 721(a) — Contribution of Portfolio Assets to the Master Fund (approximately 10 minutes)
Present the argument that each of the four contributions (Steps 2 through 4) qualifies for tax-free treatment under § 721(a). Discuss carryover basis under § 723 and holding period tacking under § 1223(2). Address the mechanics of partnership-to-partnership contributions.
4. Ruling 2: IRC § 721(b) — Investment Company Exception (approximately 10 minutes)
Present the argument that the Consolidated Master Fund LP does not constitute an "investment company" within the meaning of § 721(b) and Treas. Reg. § 1.351-1(c)(1)(ii). Discuss the operating company nature of the 23 portfolio companies and the absence of meaningful diversification.
5. Ruling 3: IRC § 367 — Inapplicability to Partnership-to-Partnership Transfers (approximately 15 minutes)
This ruling request is expected to receive the most intensive scrutiny from the IRS. Present the argument that §§ 367(a) and 367(b) do not apply to the contributions described in Steps 2 through 4 because, by their express statutory terms, those provisions apply only to transfers to or from corporations. Discuss the statutory text, legislative history, and absence of regulatory authority extending § 367 to partnerships. This topic is allocated the most time in the agenda due to its complexity and the expected level of IRS interest.
6. Ruling 4: IRC § 731(a) — Distribution Treatment (approximately 10 minutes)
Present the argument that the distributions in Step 5 qualify as tax-free distributions under § 731(a)(1). Discuss the interaction with the § 752 liability analysis and the step transaction doctrine.
7. Ruling 5: IRC § 731(c) — Marketable Securities Exception (approximately 5 minutes)
Present the argument that the distributed Master Fund LP interests are not "marketable securities" as defined in § 731(c)(2) and that the investment partnership exception is inapplicable.
8. Ruling 6: IRC § 752 — Liability Shifting (approximately 10 minutes)
Present the netting analysis for the $1.34 billion in aggregate liabilities assumed by the Consolidated Master Fund. Discuss the application of the netting rule under Treas. Reg. § 1.752-1(f) and the tiered partnership rules under Treas. Reg. § 1.752-4.
9. Ruling 7: IRC § 704(c) — Built-In Gain Carryover and Remedial Allocation Method (approximately 10 minutes)
Discuss the carryover of $1.72 billion in aggregate built-in gain under § 704(c), the continuation of the remedial allocation method under Treas. Reg. § 1.704-3(d), and the mechanics of tracking § 704(c) layers across tiered partnerships.
10. Ruling 8: IRC § 1446 — Withholding Analysis (approximately 5 minutes)
Present the nonrecognition / no withholding argument for both the contributions and the distributions. Address the application of § 1446(f) to partnership interest transfers.
11. Ruling 9 (Entity Classification): Treas. Reg. § 301.7701-3 (approximately 5 minutes)
Confirm the partnership classification for all three new entities (Consolidated Master Fund LP, International Feeder, and Tax-Exempt Feeder). This is expected to be a straightforward discussion.
12. IRS Feedback and Next Steps (approximately 15 minutes)
Solicit preliminary reactions from the IRS regarding the ruling requests. Identify any areas where the IRS desires additional representations, factual detail, or supporting documentation beyond what is contemplated in the current draft PLR request. Discuss the anticipated timeline for PLR processing and any possibility of expedited handling given the December 1, 2025 target effective date.
IV. Detailed Talking Points and Anticipated IRS Questions — By Ruling
This section sets forth our detailed substantive positions, supporting authorities, anticipated IRS questions and our proposed responses, and fallback positions for each of the ruling requests. These talking points are designed to equip the conference attendees with comprehensive preparation for the range of questions the IRS may raise during the pre-submission conference.
A. Ruling 1: IRC § 721(a) — Tax-Free Contribution
Our Position. The contributions by each of the four Legacy Offshore Vehicles of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund qualify as tax-free contributions under IRC § 721(a). Under that provision, no gain or loss is 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. We contend that each of the four contributions in Steps 2 through 4 satisfies this statutory requirement.
As a corollary to the § 721(a) nonrecognition treatment, the Consolidated Master Fund LP will take a carryover basis in the contributed assets under IRC § 723, equal to the adjusted basis of each asset in the hands of the contributing partnership at the time of contribution. The holding period of the contributed assets in the hands of the Master Fund will include the period during which the assets were held by the contributing partnerships, pursuant to IRC § 1223(2).
Each of the four contributing entities — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — is classified as a partnership for U.S. federal income tax purposes. The receiving entity, Consolidated Master Fund LP, will be classified as a partnership pursuant to a Form 8832 check-the-box election filed in connection with its formation. The transaction therefore involves contributions of property by partnerships to a partnership, which is the paradigmatic case for § 721(a) treatment.
The mechanics of partnership-to-partnership contributions are well-established in the Code, regulations, and published guidance. When a partnership contributes property to another partnership, the transaction is analyzed at the entity level — the contributing partnership is the "partner" contributing property to the receiving partnership. See Rev. Rul. 99-5 (addressing certain partnership formation transactions); Rev. Rul. 2004-43 (addressing contributions of § 704(c) property by a partnership to another partnership).
Key Asset Data
The following table summarizes the key financial data for each contribution:
Anticipated IRS Questions and Proposed Responses
Question 1: Whether each Legacy Offshore Vehicle is properly classified as a partnership for U.S. federal income tax purposes.
Response: Each of the four contributing vehicles has been classified and has filed as a partnership for U.S. federal income tax purposes since its formation. The two Cayman exempted limited partnerships (Fund IV-A and Fund V-A) are foreign eligible entities under Treas. Reg. § 301.7701-3 that default to partnership classification because each has two or more members and has not elected otherwise. The two Luxembourg SCSps (Fund IV-B and Fund V-B) are likewise foreign eligible entities that are treated as partnerships by default under Treas. Reg. § 301.7701-3. The employer identification numbers for each entity are as follows: Fund IV-A Cayman (EIN to be confirmed in PLR submission); Fund IV-B Luxembourg (EIN 98-6241571); Fund V-A Cayman (EIN to be confirmed in PLR submission); Fund V-B Luxembourg (EIN 98-7891267). Annual returns on Form 1065 (or appropriate informational returns) have been filed for each entity. We will include representations confirming partnership classification in the PLR request.
Question 2: Whether the contribution involves a disguised sale under § 707(a)(2)(B).
Response: The contributions do not constitute disguised sales. The contributing partnerships receive only partnership interests in the Consolidated Master Fund LP in exchange for their contributed assets. No cash or other property is distributed or transferred to the contributing partnerships in connection with the contributions, and no cash or other property is expected to be distributed to the contributing partnerships within two years of the contributions. The presumption under Treas. Reg. § 1.707-3(c)(1) — that transfers within two years of each other are treated as a disguised sale unless facts and circumstances indicate otherwise — is inapplicable because no transfer of money or other consideration runs from the Master Fund to the contributing vehicles. The transaction is motivated by the legitimate business purposes described in Section II.E above (cost reduction, GloBE compliance, FATCA/CRS simplification, governance streamlining), and not by any intent to effect a sale of assets. We will include detailed representations to this effect in the PLR request.
Question 3: Whether the multi-step nature of the transaction is integrated such that the contributions should be recharacterized under the step transaction doctrine.
Response: Each of the five steps of the reorganization has independent legal and business significance, occurs on a separate closing date (September 15, October 1, October 15, November 1, and December 1), involves distinct parties and distinct legal events (entity formations, asset contributions, and entity dissolutions, respectively), and is supported by separate closing documentation. The multi-step structure is required by practical and regulatory considerations, including the differing jurisdictions and regulatory regimes involved (Cayman Islands Monetary Authority, Luxembourg Commission de Surveillance du Secteur Financier), the need to form the receiving entities before contributions can be made, and the practical necessity of staggering contribution closings across different jurisdictions and local counsel teams. This issue is addressed in greater detail in Section V below (Overarching Anti-Abuse / Step Transaction Considerations).
Fallback Position. If the IRS is reluctant to rule on all four contributions in a single PLR, we could propose separating the ruling into sub-rulings (one per contributing vehicle) or, if necessary, submitting separate PLR requests for each contribution. However, we strongly prefer a single integrated ruling given the efficiencies of a consolidated approach, the fact that all four contributions involve a single receiving entity (the Consolidated Master Fund LP), and the fact that the legal analysis is substantively identical for each contribution. We should advocate firmly for the single ruling approach unless the IRS presents a compelling reason for separation.
B. Ruling 2: IRC § 721(b) — Investment Company Exception
Our Position. The Consolidated Master Fund LP does not constitute an "investment company" within the meaning of IRC § 721(b), and accordingly the § 721(b) exception to nonrecognition treatment does not apply to the contributions described in Steps 2 through 4. Under § 721(b), the general rule of nonrecognition under § 721(a) does not apply to gain realized on a transfer of property to a partnership that would be treated as an investment company (within the meaning of § 351) if the partnership were incorporated. The cross-reference to § 351 directs us to Treas. Reg. § 1.351-1(c)(1)(ii), which provides that a corporation (or, by extension, a partnership tested as if it were a corporation) is an "investment company" if more than 80% of the value of its assets (excluding cash and nonconvertible debt) consists of readily marketable stocks, securities, or interests in regulated investment companies.
The Consolidated Master Fund LP's portfolio consists entirely of interests in 23 operating companies in the digital infrastructure (data centers, fiber-optic networks, edge computing) and enterprise SaaS sectors. These are not "stocks, securities, or other investment assets" within the meaning of the regulation. They are substantial ownership stakes in actively managed operating businesses over which Solara exercises operational control through board representation, management agreements, and other governance mechanisms.
To illustrate the operating character of the portfolio, the following representative portfolio companies should be highlighted at the conference:
• NovaBright Data Systems Inc. — A Delaware corporation operating large-scale data center facilities in Virginia, Texas, and Oregon. The company owns and operates over 2.4 million square feet of data center capacity and employs approximately 1,200 people. FMV: $890 million; adjusted basis: $520 million. Held by Fund IV-A Cayman (60% interest).
• Crestline Cloud Solutions LLC — A Delaware limited liability company (disregarded for U.S. tax purposes) that develops and operates a cloud-based enterprise resource planning SaaS platform serving mid-market industrial customers. FMV: €340 million (approximately $367 million); adjusted basis: €195 million (approximately $211 million). Held by Fund IV-B Luxembourg (100% interest).
• Veridian Edge Computing Corp. — A Delaware corporation that designs, builds, and operates edge computing infrastructure at approximately 340 locations across the United States and Western Europe. FMV: $1.12 billion; adjusted basis: $780 million. Held by Fund V-A Cayman (55% interest).
• Thorngate Fiber Networks LP — A Delaware limited partnership that owns and operates approximately 18,000 miles of fiber-optic network infrastructure in the northeastern and southeastern United States. FMV: $670 million; adjusted basis: $490 million. Held by Fund IV-A Cayman (100% interest).
• Helix SaaS Holdings Ltd. — A Cayman Islands exempted company that serves as a holding company for a portfolio of six enterprise SaaS businesses across cybersecurity, compliance, and data analytics verticals. FMV: $445 million; adjusted basis: $310 million. Held by Fund V-A Cayman (100% interest).
In total, the 23 portfolio companies are all operating businesses; none are passive investment vehicles, holding companies for marketable securities, or regulated investment companies. The Consolidated Master Fund LP is not a vehicle for "diversification" in the sense contemplated by § 721(b); the assets being contributed by the four parallel vehicles already represent the same overall portfolio allocation, as the parallel funds invest pari passu with the corresponding domestic fund in each vintage. The contributions are consolidating identical economic exposure into a single receiving entity, not broadening or diversifying the investment portfolio.
Anticipated IRS Questions and Proposed Responses
Question 1: Whether any portfolio company interests could be characterized as "securities" under Treas. Reg. § 1.351-1(c)(1).
Response: All of Solara's portfolio company interests represent substantial ownership positions — generally majority ownership or significant minority stakes accompanied by contractual governance rights — in operating businesses over which Solara exercises active management control through board seats, management services agreements, and reserved matter consent rights. These interests are not publicly traded on any securities exchange, are subject to extensive transfer restrictions, and do not possess the characteristics of "readily marketable stocks or securities" within the meaning of the regulation. They are private equity investments in operating companies, not portfolio investments in marketable securities.
Question 2: Whether the aggregation of multiple parallel vehicles' assets results in "greater diversification" that triggers § 721(b).
Response: No meaningful diversification results from the proposed reorganization because the four contributing vehicles already invest in the same underlying portfolio companies on a pari passu basis. Fund IV-A Cayman and Fund IV-B Luxembourg hold interests in the same 11 Fund IV portfolio companies in proportions dictated by their parallel investment arrangements. Fund V-A Cayman and Fund V-B Luxembourg hold interests in the same 12 Fund V portfolio companies on the same basis. The contributions merely consolidate these parallel holdings into a single entity; they do not introduce any new assets, asset classes, or investment exposures that were not already present in each contributing vehicle's portfolio. The economic composition of each investor's indirect portfolio is unchanged by the reorganization.
Question 3: Request for detailed description of each portfolio company's operations.
Response: We will include in the PLR request a detailed appendix describing the business operations, revenue sources, employee counts, physical assets, and governance arrangements of each of the 23 portfolio companies, with particular emphasis on their operating (as opposed to investment) character. In addition, Redstone Advisory Group LLC, an independent valuation advisory firm, has prepared fair market value appraisals for each portfolio company that include an assessment of the operating nature of each company's business. We can make these appraisals available to the IRS if requested.
Fallback Position. If the IRS expresses concern about the application of § 721(b), we could offer to provide an independent third-party analysis — from either Caldwell Pierce & Co. LLP (Solara's independent accounting firm) or Redstone Advisory Group LLC (the independent valuation advisory firm) — confirming the operating nature of each of the 23 portfolio companies and the absence of any "readily marketable stocks or securities" in the portfolio. We could also offer to include additional representations in the PLR request that Solara actively manages and controls each portfolio company through board representation and other governance mechanisms, and that none of the portfolio companies is a passive investment vehicle or holds a portfolio of marketable securities as its principal asset.
C. Ruling 3: IRC § 367 — Inapplicability to Partnership-to-Partnership Transfers
Our Position. This ruling request is anticipated to be the most closely scrutinized by the IRS and is the issue on which we should be most thoroughly prepared. The ruling request seeks confirmation that IRC §§ 367(a) and 367(b) do not apply to the contributions described in Steps 2 through 4 of the proposed reorganization.
Our position is that §§ 367(a) and 367(b) are inapplicable by their express statutory terms because those provisions apply only to transfers to or from corporations, and neither the transferors nor the transferee in the proposed transaction is a corporation.
Section 367(a) provides that, in the case of any exchange described in § 332, § 351, § 354, § 355, § 356, or § 361, if a United States person transfers property to a foreign corporation, such foreign corporation shall not be considered a corporation for purposes of determining the extent to which gain shall be recognized on such transfer. By its express terms, § 367(a) requires a transfer "to a foreign corporation." In the proposed transaction, the transferee is the Consolidated Master Fund LP, a Delaware limited partnership classified as a domestic partnership for U.S. federal income tax purposes. The Master Fund is not a corporation, whether foreign or domestic. Section 367(a) is therefore inapplicable on its face.
Section 367(b) provides that, in the case of any exchange described in § 332, § 351, § 354, § 355, § 356, or § 361 in connection with which there is no transfer of property described in § 367(a)(1), an amount shall be included in the income of certain United States persons under regulations prescribed by the Secretary. Section 367(b) applies to exchanges involving "a foreign corporation." Here, neither the transferors (foreign partnerships) nor the transferee (a domestic partnership) is a corporation. Section 367(b) is therefore inapplicable.
The legislative history of § 367 confirms that the provision was designed to prevent the deferral or avoidance of U.S. tax through the use of foreign corporations. The Tax Reform Act of 1976 and the Deficit Reduction Act of 1984, which enacted the modern version of § 367, focused on the corporate context — the concern was that U.S. persons could transfer appreciated assets to foreign corporations and indefinitely defer U.S. tax on the built-in gain. That policy concern does not apply with equal force to partnership structures, which are transparent for U.S. tax purposes and in which partners are currently taxable on their allocable shares of partnership income.
No published guidance — whether in the form of regulations, revenue rulings, revenue procedures, notices, or announcements — extends § 367 to partnership-to-partnership transfers. While Treasury and the IRS have broad regulatory authority under both §§ 367(a) and 367(b), that authority has been exercised exclusively in the corporate context.
This ruling request is critical because the proposed reorganization involves cross-border asset movements with significant aggregate built-in gain — approximately $1.72 billion. The IRS may be concerned that the movement of assets from foreign partnerships to a domestic partnership could be used to repatriate appreciated assets without gain recognition. Our response to this concern is that the built-in gain is fully preserved through the § 704(c) regime (Ruling 7) and will be recognized by the relevant partners — including non-U.S. partners — upon the eventual disposition of the contributed assets. The partnership tax system, through §§ 704(c) and 1446, provides its own mechanism for ensuring that the U.S. taxing jurisdiction is not lost through the reorganization.
Anticipated IRS Questions and Proposed Responses
Question 1: Whether the IRS should look through the contributing foreign partnerships to their non-U.S. partners and apply § 367 at the partner level.
Response: Section 367 does not apply at the partner level to a contribution made by a partnership. It is the partnership, not the individual partners, that is the transferor of the contributed assets. The partnership is the entity that makes the contribution and that receives the Master Fund LP interests in exchange. While Subchapter K employs both aggregate and entity theories of partnerships depending on the context, the statutory language of § 367 requires a transfer by "a United States person" to "a foreign corporation" (§ 367(a)) or an exchange involving "a foreign corporation" (§ 367(b)). Neither condition is met here, whether the analysis is conducted at the partnership entity level or the partner level. At the partner level, the non-U.S. partners are not themselves making a transfer of property to a foreign corporation — they are indirect partners in a domestic partnership (the Consolidated Master Fund LP) that received property from other partnerships. The aggregate theory of partnerships does not override the statutory language of § 367, which specifically requires a "corporation" as transferor or transferee.
Question 2: Whether § 367 applies by analogy or under the anti-abuse rule.
Response: Section 367 is a specific statutory provision with defined triggering conditions — it requires a "corporation" as either the transferor or the transferee. The IRS cannot expand the reach of § 367 to partnerships by analogy absent explicit statutory authority or a promulgated regulation extending the provision to partnership transactions. The anti-abuse rule of Treas. Reg. § 1.701-2 is a general Subchapter K provision and is not a substitute for the specific statutory requirements of § 367. The anti-abuse analysis is addressed separately under Section V of this memorandum. We believe the anti-abuse rule is inapplicable because the transaction has substantial business purpose and the tax results are consistent with the intent of Subchapter K.
Question 3: Whether there is any gain recognition event under Subchapter K that effectively serves the § 367 policy.
Response: Yes. The § 367 policy of preventing permanent escape from U.S. taxing jurisdiction over built-in gain is fully served by the Subchapter K rules that apply to the reorganization. Specifically: (i) the $1.72 billion in aggregate built-in gain is preserved through § 704(c) accounts that carry over from the contributing vehicles to the Consolidated Master Fund LP (see Ruling 7); (ii) when the contributed properties are eventually sold or otherwise disposed of by the Master Fund, the built-in gain will be allocated to the contributing partners (or their successors) under § 704(c), ensuring that the gain is recognized by the appropriate parties; and (iii) to the extent any recognized gain constitutes effectively connected taxable income allocable to non-U.S. partners, withholding under § 1446 will apply. The § 704(c) overlay and the § 1446 withholding regime collectively serve the policy objectives of § 367 without requiring § 367 itself to apply to a partnership transaction.
Question 4: The Luxembourg SCSp transfers (Steps 3 and 4) specifically — whether the Luxembourg entities are properly classified as partnerships and not as associations taxable as corporations.
Response: Luxembourg sociétés en commandite spéciale (SCSps) are eligible entities under Treas. Reg. § 301.7701-3 and have elected or defaulted to partnership classification for U.S. federal income tax purposes. The two Luxembourg SCSps in the reorganization have been filing as partnerships since their respective formations. Their EINs are: Fund IV-B (Luxembourg) SCSp: EIN 98-6241571; Fund V-B (Luxembourg) SCSp: EIN 98-7891267. Their Luxembourg Registre de Commerce et des Sociétés (RCS) numbers are B 248193 and B 271056, respectively. Under Luxembourg law, an SCSp is a limited partnership without legal personality that is contractual in nature and is transparent for Luxembourg tax purposes. Under the default classification rules of Treas. Reg. § 301.7701-3(b)(2), a foreign eligible entity with two or more members that is not a per se corporation under Treas. Reg. § 301.7701-2(b)(8) is classified as a partnership. The Luxembourg SCSp is not listed as a per se corporation in Treas. Reg. § 301.7701-2(b)(8)(i). We will include detailed representations regarding the entity classification of the Luxembourg SCSps in the PLR request.
Fallback Position. If the IRS declines to issue an affirmative ruling that § 367 does not apply to the partnership-to-partnership contributions, we have several alternative approaches that should be considered in the following order of preference:
First, we could propose that the IRS issue a no-rule position on the § 367 question accompanied by a favorable "no adverse consequences" statement — i.e., a statement that the IRS will not challenge the taxpayer's position that § 367 does not apply, without affirmatively ruling on the issue. This approach has precedent in other complex PLRs involving novel issues.
Second, we could alternatively propose a ruling that even if § 367 were to apply in some theoretical sense, no gain recognition would result because the transfer is to a domestic (not foreign) entity. Section 367(a) only triggers gain on outbound transfers — i.e., transfers of property by a U.S. person to a foreign corporation. The proposed contributions are effectively inbound transfers (assets moving from foreign partnerships to a domestic partnership), which are the opposite of the pattern § 367(a) was designed to address.
Third, if the IRS asserts that gain recognition is required under any theory, we should request that such recognition be limited to the amount of built-in gain that would otherwise escape U.S. taxing jurisdiction (i.e., gain allocable to non-U.S. partners in non-treaty positions) and that recognition be deferred under a closing agreement, installment treatment under § 453, or similar mechanism. This is the least preferred outcome and should be resisted vigorously.
The § 367 ruling is the single most important ruling request from a risk perspective, and a no-rule on this issue would be problematic for the client. We should press firmly for an affirmative ruling during the conference.
D. Ruling 4: IRC § 731(a) — Distribution Treatment (Step 5)
Our Position. The distributions by the Legacy Offshore Vehicles of their partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 of the reorganization constitute tax-free distributions under IRC § 731(a)(1). Under that provision, in the case of a distribution by a partnership to a partner, gain shall not be recognized to such partner except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution.
In Step 5, each of the four Legacy Offshore Vehicles will dissolve and distribute its sole remaining asset — its limited partnership interest in the Consolidated Master Fund LP — to its respective limited partners in liquidation. No gain is recognized because the limited partners receive only partnership interests in the Master Fund (i.e., "property other than money"), and the fair market value of the distributed interest does not exceed any limited partner's outside basis in its partnership interest in the distributing vehicle.
No limited partner receives "money" in excess of its adjusted basis in its partnership interest. The distributions are liquidating distributions (the Legacy Offshore Vehicles dissolve following the distributions), and accordingly the analysis proceeds under § 731(a)(2). Under that provision, no loss shall be recognized to a distributee partner on a liquidating distribution unless the partner receives only money, unrealized receivables, and inventory. Here, the distributed property consists of Master Fund LP interests, which are none of the foregoing categories. Accordingly, no loss recognition results.
Anticipated IRS Questions and Proposed Responses
Question 1: Whether any LP's outside basis is exceeded by deemed money distributions arising from liability shifts under § 752(b).
Response: This question is addressed in detail under Ruling 6 (IRC § 752 — Liability Shifting). The netting analysis under Treas. Reg. § 1.752-1(f), as applied to the reorganization, demonstrates that no limited partner experiences a net deemed distribution of money (arising from decreases in its share of partnership liabilities) in excess of its adjusted basis in its partnership interest. The liability allocation modeling contained in PLR Exhibit E supports this conclusion for each class of investor (U.S. taxable, U.S. tax-exempt, and non-U.S.).
Question 2: Whether the distributions should be collapsed with the contributions (Steps 2–4) under the step transaction doctrine.
Response: Each step has independent business substance and occurs on a separate date. The distributions in Step 5 (December 1, 2025) occur approximately two months after the initial contribution in Step 2 (October 1, 2025). The contributions and distributions involve different parties: the contributions are made by the Legacy Offshore Vehicles (as contributing entities) to the Master Fund (as receiving entity), while the distributions are made by the Legacy Offshore Vehicles (as distributing entities) to their individual limited partners (as distributee partners). The parties on each side of the contributions and distributions are different, which weighs against collapsing the steps. Moreover, there is no circular flow of property or cash — assets move from the contributing vehicles to the Master Fund, and Master Fund interests move from the contributing vehicles to the limited partners. The end result is a straightforward consolidation, not a disguised exchange or circular transaction.
Fallback Position. If the IRS challenges § 731(a) treatment for specific limited partners with low outside bases — for example, limited partners that have received prior distributions that reduced their bases to nominal amounts — we could propose representations limiting the ruling to limited partners whose adjusted outside basis exceeds any deemed money distribution resulting from § 752(b) liability shifts. This would preserve the ruling for the vast majority of limited partners while carving out any edge cases.
E. Ruling 5: IRC § 731(c) — Marketable Securities Exception
Our Position. IRC § 731(c) does not apply to the distributions in Step 5 because the distributed interests — limited partnership interests in the Consolidated Master Fund LP — are not "marketable securities" as defined in IRC § 731(c)(2). Under § 731(c)(1), a distribution of marketable securities by a partnership to a partner is treated as a distribution of money, potentially triggering gain recognition under § 731(a)(1). However, this provision applies only to securities that meet the definition of "marketable securities" in § 731(c)(2).
Section 731(c)(2) defines "marketable securities" as financial instruments (including stocks, bonds, notes, debentures, and partnership interests) that are "actively traded" within the meaning of § 1092(d)(1) — i.e., actively traded on an established securities market. The Consolidated Master Fund LP interests are not actively traded on any established securities market. They are privately held, illiquid limited partnership interests subject to extensive transfer restrictions, including a prohibition on public trading, customary ROFR and ROFO provisions, and limitations on admitting substitute limited partners without general partner consent.
Moreover, the interests are not "readily tradable on a secondary market (or the substantial equivalent thereof)" within the meaning of § 731(c)(2)(B). There is no organized secondary market for these interests, and Solara does not intend to create or facilitate one.
In addition, the safe harbor exceptions under § 731(c)(3) provide further protection. The "investment partnership" exception under § 731(c)(3)(A)(iii) does not apply to trigger § 731(c) because the Master Fund is not an "investment partnership" as defined in § 731(c)(3)(C). An "investment partnership" is a partnership that has never been engaged in a trade or business and substantially all of whose assets consist of certain specified financial instruments (money, stock, notes, bonds, and similar items). The Master Fund's assets consist of operating company interests in digital infrastructure and SaaS businesses — not financial instruments. Accordingly, the investment partnership definition is not met, and the § 731(c)(3)(A)(iii) exception from the exception does not apply.
Anticipated IRS Questions and Proposed Responses
Question 1: Whether LP interests could become "marketable" through secondary market transactions.
Response: The Master Fund LP agreement will contain transfer restrictions that prohibit public trading of interests and prevent the interests from being treated as "readily tradable on a secondary market (or the substantial equivalent thereof)." Specifically, the LPA will include: (a) a prohibition on transfers that would cause the Master Fund to be treated as a "publicly traded partnership" within the meaning of § 7704; (b) a requirement for GP consent before any transfer; (c) customary right-of-first-refusal provisions; and (d) a representation by each transferee that it is not acquiring the interest on or through a public securities exchange or secondary market. There is currently no established secondary market for these interests, and Solara has no intention of creating or facilitating such a market.
Question 2: Whether the investment partnership exception under § 731(c)(3)(A)(iii) applies.
Response: The Master Fund is not an "investment partnership" as defined in § 731(c)(3)(C) because substantially all of its assets consist of operating company interests (equity stakes in digital infrastructure and enterprise SaaS businesses), not "stocks, bonds, notes, or similar financial instruments." The operating companies are actively managed businesses with employees, physical assets, customer relationships, and revenue-generating operations. They are not passive portfolio investments in traded securities.
Fallback Position. If the IRS insists that § 731(c) might apply to the distributed interests, we could offer to include in the PLR request a representation that the Master Fund will never permit public trading of its limited partnership interests on an established securities market and will include appropriate transfer restrictions in the limited partnership agreement to ensure that the interests cannot meet the definition of "marketable securities" under § 731(c)(2). We could also offer to include a representation that the Master Fund will comply with the safe harbor provisions of Treas. Reg. § 1.7704-1 (relating to interests not treated as readily tradable).
F. Ruling 6: IRC § 752 — Liability Shifting
Our Position. The aggregate liabilities assumed by the Consolidated Master Fund LP in connection with the reorganization total approximately $1.34 billion, consisting of portfolio-level debt (primarily subscription credit facilities and acquisition financing) across all four Legacy Offshore Vehicles. The shifts in partner-level shares of liabilities resulting from the reorganization do not trigger deemed contributions or distributions under IRC §§ 752(a) and 752(b) that result in gain recognition under § 731.
Under § 752(a), any increase in a partner's share of partnership liabilities is considered a contribution of money by such partner to the partnership. Under § 752(b), any decrease in a partner's share of partnership liabilities is considered a distribution of money by the partnership to such partner. Where the reorganization simultaneously causes both increases and decreases in a partner's share of liabilities — as is inevitable in a multi-vehicle consolidation — the netting rule of Treas. Reg. § 1.752-1(f) applies.
The netting rule provides that if, as the result of a single transaction, a partner's share of partnership liabilities increases and decreases, only the net increase or decrease is treated as a contribution or distribution under §§ 752(a) and 752(b). We contend that the five-step reorganization constitutes a "single transaction" for purposes of Treas. Reg. § 1.752-1(f) because it is carried out pursuant to a single integrated plan, is approved as a unified reorganization by the GP and LPAC, and results in a single consolidated structure. Under the netting approach, the net change in each partner's share of liabilities is calculated, and only the net amount is treated as a deemed contribution or distribution.
The tiered partnership rules under Treas. Reg. § 1.752-4 are also implicated by the post-reorganization structure, because the feeder vehicles (International Feeder and Tax-Exempt Feeder) will invest into the Master Fund, creating a multi-tier partnership structure. Under § 1.752-4(a), a partner's share of the liabilities of a lower-tier partnership is determined in accordance with the partner's interest in the lower-tier partnership. We have modeled the tiered partnership liability allocation in PLR Exhibit E.
Detailed liability allocation modeling (PLR Exhibit E) shows pre-reorganization and post-reorganization allocations for each partner and each liability tranche. The modeling demonstrates that no limited partner experiences a net deemed distribution under § 752(b) that would produce gain under § 731(a)(1).
Anticipated IRS Questions and Proposed Responses
Question 1: Whether the IRS accepts the netting approach under Treas. Reg. § 1.752-1(f) for this type of multi-step reorganization.
Response: The netting rule of Treas. Reg. § 1.752-1(f) is well-established and has been applied in analogous private letter rulings involving partnership reorganizations and consolidations. The key requirement is that the increases and decreases in liability shares occur "as part of a single transaction." Our five-step reorganization qualifies as a single integrated plan: it was conceived as a unified reorganization, approved as such by the GP board on March 14, 2025, and by the LPAC (with 78% consent in interest) on April 22, 2025. All five steps are part of a single reorganization plan with a single set of transaction documents. The fact that the steps are scheduled on different dates for practical and regulatory reasons does not prevent the transaction from being treated as a "single transaction" for netting purposes; the regulation does not require that all events occur simultaneously.
Question 2: The allocation of recourse vs. nonrecourse liabilities.
Response: All $1.34 billion in portfolio-level debt that will be assumed by the Consolidated Master Fund LP is nonrecourse debt at the partnership level. No partner or related person bears the economic risk of loss with respect to any of these liabilities within the meaning of Treas. Reg. § 1.752-2. Accordingly, the liabilities are allocated under the three-tier allocation rules for nonrecourse liabilities set forth in Treas. Reg. § 1.752-3: (i) first, in accordance with each partner's share of partnership minimum gain under § 1.704-2; (ii) second, in accordance with each partner's share of § 704(c) minimum gain; and (iii) third, in accordance with each partner's interest in partnership profits (the "excess nonrecourse liabilities" tier). We will provide detailed schedules showing the allocation of each liability tranche under each of the three tiers in PLR Exhibit E.
Question 3: Impact on specific LPs, particularly U.S. tax-exempt investors and non-U.S. investors.
Response: The liability shifts for each representative investor class (U.S. taxable, U.S. tax-exempt, and non-U.S.) have been modeled in PLR Exhibit E. The modeling demonstrates that no limited partner in any investor class experiences a net decrease in its share of liabilities that would produce a deemed distribution under § 752(b) in excess of the partner's adjusted outside basis. The reason is that the consolidation of the four offshore vehicles into a single Master Fund does not fundamentally change the economic arrangement — each limited partner's proportionate interest in the underlying portfolio (and the associated liabilities) remains substantially unchanged. The netting effect ensures that the modest increases and decreases in liability shares resulting from the change in partnership structure cancel out or produce only de minimis net changes.
Fallback Position. If the IRS identifies specific limited partners for whom the netting analysis creates a net deemed distribution that would produce gain, we could propose one or more of the following remedies: (a) excluding those specific limited partners from the scope of the ruling; (b) restructuring the liability assumption to avoid the issue — for example, by having specific liabilities assumed in a different sequence or by conducting a pre-reorganization capital call to retire certain debt tranches before the contributions; or (c) providing additional representations that the identified limited partners have sufficient outside basis to absorb any net deemed distribution. Approach (b) would require coordination with Solara's finance team (Douglas Wexford, CFO) and the relevant lenders, and may have commercial implications that the client would need to evaluate.
G. Ruling 7: IRC § 704(c) — Built-In Gain Carryover and Remedial Allocation Method
Our Position. The built-in gain and loss accounts tracked under IRC § 704(c) by each of the four Legacy Offshore Vehicles carry over to the Consolidated Master Fund LP with respect to each property contributed in Steps 2 through 4. This carryover is required by the principles of § 704(c), which mandate that allocations take into account the difference between the adjusted tax basis and the fair market value of contributed property at the time of contribution. When a partnership (the contributing vehicle) contributes property with existing § 704(c) built-in gain to another partnership (the Master Fund), the § 704(c) accounts carry over to the receiving partnership — the Master Fund steps into the shoes of the contributing partnership with respect to those accounts.
The total aggregate built-in gain that will carry over is approximately $1.72 billion. The key individual property built-in gain amounts are as follows:
In addition to the carryover of § 704(c) accounts, the Consolidated Master Fund LP may continue to use the remedial allocation method under Treas. Reg. § 1.704-3(d) for each contributed property. The remedial allocation method is the § 704(c) allocation method currently used by each of the Legacy Offshore Vehicles for their portfolio company interests. Under the remedial method, when the book value of contributed property is recovered more quickly than its tax basis (or vice versa), the receiving partnership creates offsetting remedial allocations of income, gain, loss, or deduction to the contributing and non-contributing partners, ensuring that the noncontributing partners are not disadvantaged by the pre-contribution built-in gain or loss.
Rev. Rul. 2004-43 and its progeny support the carryover of § 704(c) accounts in partnership-to-partnership contributions. In that rul

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ENGAGEMENT NO.: 20250527-SDILP-PLR

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