1041-00005 · Client 1041 · Tax Analysis

tax-memo-anti-abuse-step-transaction.docx DOCUMENT M&A / Corporate

69 / 86 ← → ✕

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

TO: Leonard Cross, Partner; Sylvia Hartwell, Partner — Calderwood & Harkness LLP

FROM: Robert Jansen, Lead Associate; Garrett Simmons, Working Associate — Calderwood & Harkness LLP

DATE: June 16, 2025

RE: Solara Digital Infrastructure LP — Cross-Border Fund-Platform Reorganization: Anti-Abuse Considerations (Substance-Over-Form Doctrine, Step Transaction Doctrine, and Treas. Reg. § 1.701-2 Partnership Anti-Abuse Rule)

ENGAGEMENT: Matter No. 20250527-SDILP-PLR

CLIENT: Solara Digital Infrastructure LP (EIN 82-4917366)

Right-click to update Table of Contents

I. Executive Summary

This memorandum analyzes whether the Internal Revenue Service ("IRS") could successfully challenge the proposed five-step cross-border reorganization of Solara Digital Infrastructure LP's ("Solara" or the "Sponsor") fund platform under three judicial and regulatory anti-abuse doctrines: (1) the substance-over-form doctrine (including its codification in IRC § 7701(o)), (2) the step transaction doctrine, and (3) the partnership anti-abuse rule of Treasury Regulations § 1.701-2 (the "Partnership Anti-Abuse Rule"). This memorandum has been prepared in connection with the firm's engagement to prepare a private letter ruling ("PLR") request on behalf of Solara, and the analysis set forth herein will inform the representations and legal discussion included in that submission.

The proposed reorganization involves the domestication and consolidation of four offshore fund vehicles — Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman"), Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux"), Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman"), and Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux") — into a newly formed Delaware-domiciled master fund structure, Solara Consolidated Master Fund LP (the "Master Fund" or "Consolidated Master Fund LP"), together with two newly formed Cayman Islands feeder partnerships: Solara International Feeder (Cayman) LP (the "International Feeder") and Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"). The reorganization is to be implemented through a five-step sequence, with a target effective date of December 1, 2025.

The aggregate fair market value ("FMV") of assets being transferred to the Consolidated Master Fund LP is approximately $7.75 billion, with an aggregate adjusted tax basis of approximately $6.03 billion, resulting in total built-in gain of approximately $1.72 billion. Aggregate liabilities to be assumed by the Master Fund are approximately $1.34 billion. The transferred assets include equity and debt interests in twenty-three portfolio companies across digital infrastructure (data centers, fiber-optic networks, edge computing) and enterprise SaaS verticals.

Conclusion. Based on the analysis set forth in this memorandum, we conclude that the IRS would not have a viable basis for challenging the proposed reorganization under any of the three anti-abuse doctrines examined. Our conclusions, in summary, are as follows:

Substance-Over-Form / Economic Substance (IRC § 7701(o)). Each of the five steps in the proposed reorganization has an independent business purpose and meaningful economic substance beyond tax benefits. The reorganization is driven by substantial non-tax motivations — principally operational cost reduction of approximately $3.8 million annually, forthcoming OECD Pillar Two GloBE compliance, FATCA/CRS reporting simplification, and LP-requested governance consolidation. Both prongs of the codified economic substance doctrine under IRC § 7701(o) are satisfied.

Step Transaction Doctrine. Even if the IRS were to collapse the five steps under the step transaction doctrine (applying any of the three judicial tests — end result, interdependence, or binding commitment), the overall result — a tax-free contribution of partnership assets to a partnership under IRC § 721(a) followed by a tax-free distribution of partnership interests under IRC § 731(a) — would remain consistent with the intended tax treatment. The stepped approach reflects genuine operational, jurisdictional, and regulatory requirements rather than a tax-motivated sequencing, and no binding commitment exists at Step 1 to complete all subsequent steps. Importantly, "collapsing" the steps is harmless because the collapsed transaction would receive the same nonrecognition treatment as the stepped transaction.

Partnership Anti-Abuse Rule (Treas. Reg. § 1.701-2). The Partnership Anti-Abuse Rule does not apply because the transaction does not produce results inconsistent with the intent of Subchapter K, and the use of the partnership form is integral to the legitimate fund management structure rather than a tax-avoidance device. The Consolidated Master Fund LP, the International Feeder, and the Tax-Exempt Feeder are each bona fide partnerships conducting genuine investment management activities, and the reorganization is not undertaken for a principal purpose of reducing the aggregate federal tax liability of the partners.

We recommend proceeding with the PLR request and incorporating the representations and analyses described in Section X of this memorandum.

II. Factual Background

A. Existing Fund Structure

Solara Digital Infrastructure LP is a Delaware limited partnership founded on March 17, 2014, with its principal office located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara operates as a private equity sponsor focused on digital infrastructure — specifically, data centers, fiber-optic networks, and edge computing facilities — and enterprise software-as-a-service ("SaaS") businesses. As of March 31, 2025, Solara manages approximately $14.7 billion in aggregate assets under management ("AUM") across multiple fund vehicles and co-investment structures.

The general partner of Solara Digital Infrastructure LP is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company managed by Viktor Raines, Managing Partner and Founder. Mr. Raines has served as Managing Partner since Solara's inception and is the sole Class A member of the GP LLC, with Priya Narasimhan (General Counsel), Stefan Dalmqvist (Head of Tax), and Douglas Wexford (Chief Financial Officer) serving as Class B members with advisory voting rights on specified matters.

Solara currently operates its fund platform through six parallel fund vehicles organized across three jurisdictions. This parallel structure was originally designed to accommodate the tax, regulatory, and legal requirements of different categories of investors, as described more fully below.

Delaware (U.S. Taxable Investors):

Fund IV LP (EIN 85-2103748). Solara Digital Partners Fund IV LP ("Fund IV LP") is a Delaware limited partnership with approximately $4.2 billion in committed capital. Fund IV LP has a 2021 vintage and is approximately 72% deployed as of March 31, 2025. Fund IV LP was formed to accommodate U.S. taxable investors, including high-net-worth individuals, family offices, and taxable institutional investors, who invest directly in a partnership that passes through income, gain, loss, and deduction items for U.S. federal income tax purposes.

Fund V LP (EIN 88-3467219). Solara Digital Partners Fund V LP ("Fund V LP") is a Delaware limited partnership with approximately $5.6 billion in committed capital. Fund V LP has a 2023 vintage and is approximately 38% deployed as of March 31, 2025. Fund V LP serves the same investor demographic as Fund IV LP but represents Solara's more recent fundraise.

Cayman Islands (Non-U.S. and U.S. Tax-Exempt Investors):

Fund IV-A (Cayman) LP (EIN 98-6241503; CIMA Registration MF-72491). Solara Digital Partners Fund IV-A (Cayman) LP is an exempted limited partnership organized under the laws of the Cayman Islands, with approximately $1.85 billion in committed capital. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company. The registered office of Fund IV-A Cayman is Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111.

Fund V-A (Cayman) LP (EIN 98-7891234; CIMA Registration MF-89103). Solara Digital Partners Fund V-A (Cayman) LP is an exempted limited partnership organized under the laws of the Cayman Islands, with approximately $2.45 billion in committed capital. Fund V-A Cayman operates under the same general partner and registered office arrangements as Fund IV-A Cayman.

Luxembourg (Non-U.S. Investors with Treaty and Regulatory Requirements):

Fund IV-B (Luxembourg) SCSp (EIN 98-6241571; Registre de Commerce et des Sociétés ("RCS") B 248193). Solara Digital Partners Fund IV-B (Luxembourg) SCSp is a Luxembourg special limited partnership (société en commandite spéciale) with approximately €1.15 billion in committed capital (equivalent to approximately $1.24 billion at an exchange rate of 1.08 EUR/USD). The gérant (managing general partner) is Solara Luxembourg Management S.à r.l. (RCS B 248194), a Luxembourg private limited liability company. The registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg.

Fund V-B (Luxembourg) SCSp (EIN 98-7891267; RCS B 271056). Solara Digital Partners Fund V-B (Luxembourg) SCSp is a Luxembourg SCSp with approximately €1.38 billion in committed capital (equivalent to approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux operates under the same managing general partner as Fund IV-B Lux.

The historical rationale for this parallel multi-vehicle structure is as follows. U.S. taxable investors invest through the Delaware main funds (Fund IV LP and Fund V LP), which are treated as pass-through partnerships for U.S. federal income tax purposes. U.S. tax-exempt investors — including public pension funds, university endowments, and charitable foundations — have historically invested through the Cayman vehicles to achieve certain benefits with respect to unrelated business taxable income ("UBTI") through the use of blocker structures that are interposed between the tax-exempt investors and operating business income. Non-U.S. investors — including sovereign wealth funds, insurance companies, and non-U.S. pension funds — have invested through either the Cayman vehicles (for investors in jurisdictions without applicable tax treaties) or the Luxembourg vehicles (for investors requiring access to Luxembourg's network of tax treaties or regulatory frameworks, such as the EU-mandated regulatory regime applicable to alternative investment fund managers).

This parallel structure, while serving legitimate investor-facing purposes, has resulted in significant operational complexity and cost, which is discussed more fully in Section II.F below.

B. Key Investors (Representative)

The following is a representative sample of the key investors across Solara's fund platform, provided for context in evaluating the business rationale for the reorganization and the diversity of investor types that the structure must accommodate:

Pinnacle State Employees' Retirement System (U.S. public pension fund). Pinnacle has committed $275 million to Fund IV and $340 million to Fund V, for aggregate commitments of $615 million. The Chief Investment Officer is Margaret Faulkner. Pinnacle invests through the Cayman vehicles as a tax-exempt investor seeking UBTI protection.

Grandview University Endowment (U.S. tax-exempt endowment). Grandview has committed $120 million to Fund IV and $185 million to Fund V, for aggregate commitments of $305 million. The Director of the Endowment is Harold Kingsley. Grandview invests through the Cayman vehicles for substantially the same UBTI-related reasons as Pinnacle.

Nordhaven Sovereign Wealth Fund (non-U.S. sovereign investor, Kingdom of Nordhaven). Nordhaven SWF has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman, for aggregate commitments of $880 million. The principal contact is Anders Bjørkman, Chief Portfolio Manager. Nordhaven invests through the Cayman vehicles as a non-U.S. sovereign investor not subject to U.S. federal income tax under IRC § 892 on certain categories of income. Nordhaven has retained independent tax counsel, Bramhall & Quelwick LLP (Jason Tremaine, Partner), to review the proposed reorganization from Nordhaven's perspective.

Kestrel Pacific Insurance Group (non-U.S. insurer, Singapore). Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux, for aggregate commitments of €475 million (approximately $513 million at 1.08 EUR/USD). The principal contact is Christine Leung, Head of Alternative Investments. Kestrel invests through the Luxembourg vehicles for regulatory and treaty-related reasons.

Argyle Family Office Holdings LLC (U.S. taxable family office). Argyle has committed $95 million to Fund IV and $130 million to Fund V, for aggregate commitments of $225 million. The Principal is Elliot Argyle. Argyle invests directly through the Delaware main funds as a U.S. taxable investor.

C. The Proposed Five-Step Reorganization

The proposed reorganization is designed to consolidate Solara's four offshore fund vehicles into a single Delaware-domiciled master fund with two Cayman feeder partnerships, while preserving the separate existence of the two Delaware main funds (Fund IV LP and Fund V LP) as co-investing vehicles alongside the Master Fund. The reorganization will be implemented through five sequential steps, each of which is described below. The target effective date for completion of the entire reorganization is December 1, 2025.

Step 1 — Formation of New Entities (Target: September 15, 2025)

The first step involves the formation of the following new entities:

(a) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company to be formed by filing a Certificate of Formation with the Delaware Secretary of State. This entity will serve as the general partner of the Consolidated Master Fund LP.

(b) Solara Consolidated Master Fund LP (the "Master Fund"), a Delaware limited partnership to be formed by filing a Certificate of Limited Partnership with the Delaware Secretary of State. The Master Fund will be the central holding entity for all portfolio assets currently held by the four offshore vehicles.

(c) Solara International Feeder (Cayman) LP (the "International Feeder"), an exempted limited partnership to be organized under the laws of the Cayman Islands. The International Feeder will serve as the investment vehicle for non-U.S. investors who are currently invested through the Cayman and Luxembourg offshore vehicles.

(d) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), an exempted limited partnership to be organized under the laws of the Cayman Islands. The Tax-Exempt Feeder will serve as the investment vehicle for U.S. tax-exempt investors who are currently invested through the Cayman offshore vehicles.

Immediately upon formation, Form 8832 (Entity Classification Election) will be filed under Treasury Regulations § 301.7701-3 for each new entity to elect treatment as a partnership for U.S. federal income tax purposes. The Delaware entities will be formed using Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904, as registered agent. The Cayman entities will be formed through Meridian Offshore Legal, with Fiona McAllister serving as lead counsel for the Cayman formations.

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 a limited partnership interest in the Master Fund. The aggregate FMV of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in built-in gain of approximately $690 million. Key portfolio companies included in this contribution are:

(a) NovaBright Data Systems Inc. — FMV of $890 million; adjusted tax basis of $520 million; built-in gain of $370 million. NovaBright is held 60% by Fund IV-A Cayman and 40% by Fund IV LP.

(b) Thorngate Fiber Networks LP — FMV of $670 million; adjusted tax basis of $490 million; built-in gain of $180 million. Thorngate is held 100% by Fund IV-A Cayman.

The contribution will be treated as a tax-free contribution under IRC § 721(a), with the Master Fund taking a carryover basis in the contributed assets under IRC § 723 and tacking the contributing fund's holding period under IRC § 1223(2). Section 704(c) accounts will be established to preserve the built-in gain attributable to each contributed asset.

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 a limited partnership interest in the Master Fund. The aggregate FMV of the contributed assets is approximately €1.07 billion ($1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million ($844.6 million), resulting in built-in gain of approximately €288 million ($311 million). A key portfolio company included in this contribution is:

Crestline Cloud Solutions LLC — FMV of €340 million ($367 million); adjusted tax basis of €195 million ($211 million); built-in gain of €145 million ($156 million). Crestline is held 100% by Fund IV-B Lux.

The contribution will be treated as a tax-free contribution under IRC § 721(a), with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). Luxembourg tax clearance is required in connection with this step, and Veldhuis & Gérard S.à r.l. (Marc Gérard, Partner) has confirmed that no Luxembourg capital gains tax is expected to arise under Article 3(2) of the Luxembourg law of July 12, 2013.

Step 4 — Fund V Offshore Contributions (Target: November 1, 2025)

Both Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund.

(a) Fund V-A (Cayman) LP will contribute assets with an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and built-in gain of approximately $550 million. Key portfolio companies include:

Veridian Edge Computing Corp. — FMV of $1.12 billion; adjusted tax basis of $780 million; built-in gain of $340 million. Veridian is held 55% by Fund V-A Cayman and 45% by Fund V LP.

Helix SaaS Holdings Ltd. — FMV of $445 million; adjusted tax basis of $310 million; built-in gain of $135 million. Helix is held 100% by Fund V-A Cayman.

(b) Fund V-B (Luxembourg) SCSp will contribute assets with an aggregate FMV of approximately €1.29 billion ($1.39 billion at 1.08 EUR/USD), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and built-in gain of approximately €150 million ($162 million).

Each contribution will be treated as a tax-free contribution under IRC § 721(a), with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). Section 704(c) accounts will be established for all contributed assets with built-in gain or built-in loss.

Step 5 — Dissolution and LP Migration (Target: December 1, 2025)

Following the completion of Steps 2 through 4, the four legacy offshore vehicles (Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux) will dissolve and distribute their sole remaining assets — their respective limited partnership interests in the Consolidated Master Fund LP — to their respective limited partners. The distributions will be treated as tax-free distributions of partnership property under IRC § 731(a).

Upon receipt of their Master Fund LP interests, the limited partners of the dissolving vehicles will be directed to the appropriate feeder vehicle based on their investor category:

(a) Non-U.S. limited partners (including the Nordhaven Sovereign Wealth Fund and Kestrel Pacific Insurance Group) will contribute their Master Fund LP interests to the International Feeder (Cayman) LP.

(b) U.S. tax-exempt limited partners (including the Pinnacle State Employees' Retirement System and Grandview University Endowment) will contribute their Master Fund LP interests to the Tax-Exempt Feeder (Cayman) LP.

U.S. taxable investors (such as Argyle Family Office Holdings LLC) will remain directly invested in Fund IV LP and Fund V LP, which will continue to co-invest alongside the Master Fund in the underlying portfolio companies.

The dissolution of each legacy vehicle will be effected in accordance with its governing law — Cayman Islands law for Fund IV-A Cayman and Fund V-A Cayman (coordinated with Meridian Offshore Legal and Fiona McAllister) and Luxembourg law for Fund IV-B Lux and Fund V-B Lux (coordinated with Veldhuis & Gérard S.à r.l. and Marc Gérard). Regulatory deregistrations will be filed with CIMA (for the Cayman vehicles) and the CSSF (for the Luxembourg vehicles).

D. Aggregate Financial Summary of the Reorganization

The following table summarizes the aggregate financial dimensions of the proposed reorganization:

The magnitude of the assets, liabilities, and built-in gains involved underscores both the significance of the reorganization and the importance of obtaining IRS confirmation of the intended tax treatment through the PLR process.

E. Intended Tax Treatment

The intended U.S. federal income tax treatment of each step in the proposed reorganization is as follows:

Steps 2 through 4 (Contributions). The contribution of portfolio assets by each of the four legacy offshore vehicles to the Consolidated Master Fund LP will be treated as a tax-free contribution of property to a partnership in exchange for a partnership interest under IRC § 721(a). The Master Fund will take a carryover basis in each contributed asset under IRC § 723, and the Master Fund's holding period for each asset will include the contributing fund's holding period under IRC § 1223(2). Built-in gain and built-in loss accounts will be established and maintained under IRC § 704(c) using the remedial allocation method prescribed by Treasury Regulations § 1.704-3(d).

Step 5 (Distributions and Dissolution). The distribution by each dissolving legacy vehicle of its Master Fund LP interest to its respective limited partners will be treated as a tax-free distribution of partnership property under IRC § 731(a). No gain will be recognized by any partner unless the money distributed exceeds the partner's adjusted basis in its partnership interest, and no money is expected to be distributed in connection with Step 5.

The PLR request will seek eight specific rulings from the IRS covering the following provisions: IRC §§ 721(a) (nonrecognition on contributions), 721(b) (investment company exception inapplicability), 367 (inapplicability of outbound transfer rules), 731(a) and 731(c) (nonrecognition on distributions), 752 (treatment of liability assumptions and releases), 704(c) (allocation of built-in gains), 1446 (withholding on effectively connected income), and entity classification under Treasury Regulations § 301.7701-3 (confirmation of partnership classification for each new entity).

F. Business Rationale for the Reorganization

The reorganization is motivated by four independent, substantial non-tax business purposes, each of which is documented in contemporaneous business records, including the GP board resolution of March 14, 2025, the LPAC presentation materials dated April 11, 2025, and the engagement scope memorandum prepared by the Solara in-house team.

(i) Operational Cost Reduction

Solara currently incurs approximately $3.8 million annually in duplicative offshore administration, audit, regulatory, and legal compliance costs associated with maintaining four parallel offshore fund vehicles across two foreign jurisdictions. Consolidating these vehicles into the Master Fund and the two feeder structures will eliminate the following categories of duplicative expense:

Fund administration. Clarendon Fund Services Ltd. currently provides separate fund administration services to each of the four offshore vehicles, including NAV calculation, investor reporting, capital call processing, and distribution processing. The annual cost of maintaining four separate administration mandates (as opposed to a consolidated mandate for the Master Fund and feeders) is approximately $1.4 million.

Audit. Caldwell Pierce & Co. LLP currently performs separate annual audits of each of the four offshore vehicles, in addition to the audits of Fund IV LP and Fund V LP. Elimination of four separate offshore audit engagements (replaced by a single Master Fund audit, plus limited-scope audits of the two feeders) is expected to save approximately $900,000 annually.

Legal compliance. Meridian Offshore Legal (Cayman) and Veldhuis & Gérard S.à r.l. (Luxembourg) currently maintain separate ongoing retainer relationships with each of the Cayman and Luxembourg vehicles, respectively, for regulatory compliance, AML/KYC maintenance, FATCA/CRS reporting, and general corporate upkeep. Consolidation is expected to reduce these costs by approximately $750,000 annually.

Registered office services. Harborstone Corporate Services Ltd. provides registered office services to each of the two Cayman vehicles under separate engagement letters. Consolidation of the Cayman vehicles into the two feeder structures will eliminate one set of registered office fees, saving approximately $150,000 annually.

Regulatory fees and filings. CIMA registration maintenance fees for two separate Cayman vehicles, and CSSF notification and reporting costs for two separate Luxembourg vehicles, total approximately $600,000 annually. Deregistration of the four legacy vehicles and registration of the two feeders will result in a net reduction in ongoing regulatory costs.

The aggregate annual cost savings of approximately $3.8 million have been documented in a detailed cost analysis prepared by Douglas Wexford (CFO) and Stefan Dalmqvist (Head of Tax), which will be included as an exhibit to the PLR request.

(ii) OECD Pillar Two GloBE Rules

The OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules, as implemented in Luxembourg through the Grand-Ducal Regulation transposing EU Council Directive 2022/2523, become effective for Solara's Luxembourg entities beginning with fiscal year 2025. The GloBE rules impose a 15% global minimum effective tax rate on constituent entities of multinational enterprise groups with consolidated group revenues exceeding €750 million in at least two of the four preceding fiscal years. Solara's Luxembourg SCSp structures were originally established to provide treaty access and regulatory advantages for non-U.S. investors. The imposition of the GloBE minimum tax substantially diminishes the benefits of maintaining these Luxembourg structures, because the SCSps will now be subject to top-up tax to the extent their effective tax rate falls below 15%. Continuing to maintain the Luxembourg SCSps has therefore become economically irrational irrespective of U.S. tax consequences, and the Pillar Two impact assessment prepared by Stefan Dalmqvist and reviewed by Caldwell Pierce & Co. LLP supports the conclusion that dissolution of the Luxembourg structures is warranted on a purely non-tax basis.

(iii) FATCA and CRS Compliance Simplification

The maintenance of four separate offshore entities — each of which constitutes a separate "reporting financial institution" or "reporting entity" for purposes of the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS") — requires the preparation and filing of separate FATCA reports (including Forms 8966 and, in certain cases, Forms W-8BEN-E or W-8IMY for investors) and CRS reports with the applicable tax information exchange authorities. Consolidating the four offshore vehicles into the Master Fund and two feeders will reduce the number of separate FATCA and CRS reporting obligations, decrease the risk of reporting errors and inconsistencies, and lower the overall compliance burden on Solara's in-house tax and operations teams.

(iv) LP-Requested Governance Simplification

Solara's Limited Partner Advisory Committee ("LPAC"), which consists of representatives of the fund's largest institutional investors, has for several years requested that Solara streamline its governance structure across the parallel fund vehicles. The parallel structure requires each vehicle to maintain separate limited partnership agreements (or, in the case of the Luxembourg SCSps, separate partnership agreements governed by Luxembourg law), separate advisory committee structures, separate investment period provisions, separate fee and carry arrangements, and separate reporting obligations. This multiplicity of governance frameworks creates administrative burden for LPs — particularly large institutional investors that hold commitments across multiple vehicles — and reduces transparency.

At a meeting held on April 22, 2025, the LPAC voted to grant preliminary consent to the proposed reorganization, with 78% in interest voting in favor. The LPAC was advised by independent counsel, Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner), which conducted its own review of the reorganization framework and endorsed the consolidation on governance and efficiency grounds. The LPAC's preliminary consent is non-binding and is subject to final approval upon review of the PLR request and the definitive transaction documents, but it constitutes strong evidence of genuine investor demand for the reorganization.

III. Legal Framework

This section sets forth the legal framework for the three anti-abuse doctrines under which the IRS could potentially challenge the proposed reorganization. Each doctrine is discussed in turn.

A. The Substance-Over-Form Doctrine

General Principles. The substance-over-form doctrine is a longstanding judicial principle under which the IRS and the courts may disregard the legal form chosen by a taxpayer and instead recharacterize a transaction in accordance with its economic substance, where the form selected by the taxpayer lacks economic substance or fails to reflect the economic reality of the transaction. The doctrine is rooted in the principle, articulated by the Supreme Court in Gregory v. Helvering, 293 U.S. 465, 469 (1935), that a transaction must have a "business or corporate purpose" beyond the obtaining of a tax benefit, and that the tax law "deals with substance and realities" rather than merely with "forms and labels." The doctrine has been applied in a range contexts, including reorganizations, sales and exchanges, financing transactions, and partnership formations.

Leading Cases. The substance-over-form doctrine was first given definitive articulation by the Supreme Court in Gregory v. Helvering, 293 U.S. 465 (1935), where the Court held that a corporate reorganization that complied with the literal statutory requirements nevertheless could be disregarded for tax purposes because it was a "mere device" without business or corporate purpose. Justice Sutherland's opinion established the foundational principle that "the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended."

In Knetsch v. United States, 364 U.S. 361 (1960), the Supreme Court applied the substance-over-form doctrine to disregard a borrowing arrangement used to generate interest deductions, holding that the transaction lacked economic substance because the taxpayer had no genuine economic interest in the underlying property apart from the tax benefits.

In Frank Lyon Co. v. United States, 435 U.S. 561 (1978), the Supreme Court articulated the converse principle: where a transaction is imbued with genuine economic substance and the form chosen reflects a real economic transaction entered into by parties with adverse economic interests, the chosen form will be respected for tax purposes. The Frank Lyon decision is significant because it establishes that the substance-over-form doctrine does not permit the IRS to recharacterize transactions that have real economic substance merely because the form chosen also produces tax benefits.

Taken together, these cases establish a framework under which a transaction's form will be respected for tax purposes if and only if: (1) the chosen form has economic substance apart from its tax benefits; (2) the transaction meaningfully changes the taxpayer's economic position; and (3) the taxpayer has a genuine non-tax business purpose for entering into the transaction.

Codification Under IRC § 7701(o)

Effective for transactions entered into after March 30, 2010, IRC § 7701(o) codifies the economic substance doctrine. Under § 7701(o)(1), the economic substance doctrine is applied on a conjunctive two-prong basis: a transaction shall be treated as having economic substance only if —

(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and

(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

Section 7701(o)(5)(A) defines the "economic substance doctrine" as the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. Section 7701(o)(2) provides that profit potential may be considered for purposes of prong (A), but only if the present value of the reasonably expected pre-tax profit is substantial in relation to the present value of the expected net tax benefits. Section 7701(o)(5)(C) clarifies that the determination of whether the economic substance doctrine is "relevant" to any transaction is made without regard to the statutory provision — in other words, the statute does not create a new requirement that every transaction must satisfy the economic substance doctrine, but codifies the doctrine where it is otherwise applicable.

The penalty consequences of failing the economic substance doctrine are severe: under IRC § 6662(b)(6), a strict-liability 20% accuracy-related penalty applies (increased to 40% under IRC § 6662(i) for nondisclosed transactions), without the possibility of a reasonable cause defense under § 6664(c)(2).

B. The Step Transaction Doctrine

General Principles. The step transaction doctrine is a judicial doctrine closely related to — and in some formulations a subset of — the substance-over-form doctrine. Under the step transaction doctrine, when a series of formally separate steps are in substance integrated elements of a single transaction, the IRS and the courts may collapse the separate steps and treat the overall transaction as a single event for tax purposes. The doctrine is premised on the principle that the tax consequences of a transaction should be determined by looking at the substance of what occurred overall, rather than by analyzing each formal step in isolation.

The step transaction doctrine is significant in the context of the Solara reorganization because the proposed reorganization involves five sequential steps occurring over a period of approximately ten weeks (September 15, 2025 through December 1, 2025). The key question is whether the IRS could collapse all five steps into a single integrated transaction and, if so, whether such collapsing would alter the tax consequences.

Three Judicial Tests

Courts have articulated three distinct tests for determining when the step transaction doctrine applies. These tests are not mutually exclusive; different courts and different circuits have applied different tests, and the IRS has at times argued for the application of whichever test is most favorable to its position. The three tests are:

(1) The End Result Test. Under the end result test, as applied in Penrod v. Commissioner and King Enterprises v. United States, 418 F.2d 511 (Ct. Cl. 1969), a series of formally separate steps will be collapsed into a single transaction if the steps were prearranged parts of a single transaction intended to reach a particular end result. This is the broadest of the three tests and is most readily satisfied by the IRS because it requires only a showing that the taxpayer had a single overall plan and intended from the outset to reach the ultimate end result. Under this test, the focus is on the taxpayer's subjective intent and the objective planning of the transaction.

(2) The Interdependence Test. Under the interdependence test, as applied in Redding v. Commissioner, 630 F.2d 1169 (7th Cir. 1980), the step transaction doctrine will apply only if the individual steps in the series are so interdependent that "the legal relations created by one transaction would have been fruitless without a completion of the series." This test is narrower than the end result test because it requires an inquiry into whether each step has independent significance — that is, whether any step standing alone would achieve a meaningful result for the parties, or whether the steps are so intertwined that no step has meaning absent the others.

(3) The Binding Commitment Test. Under the binding commitment test, as applied in Commissioner v. Gordon, 391 U.S. 83 (1968), the step transaction doctrine will apply only if, at the time the first step was entered into, there existed a binding commitment to undertake the later step or steps. This is the narrowest of the three tests because it requires the existence of an enforceable legal obligation, not merely a plan or intent, to complete the subsequent steps. Under this test, a taxpayer who retains discretion to complete or abandon later steps — even if the taxpayer intends to complete them — will not be subject to collapsing.

Application to the Solara Reorganization

The key question for purposes of the Solara reorganization is whether the IRS could invoke any of the three step transaction tests to collapse Steps 1 through 5 into a single integrated transaction. This question has two components: (a) the threshold question of whether the steps can be collapsed under any of the three tests, and (b) the consequential question of whether collapsing the steps would change the tax result. As discussed in Section V below, we conclude that even under the broadest test (the end result test), collapsing the steps would not alter the tax treatment because the collapsed transaction — a contribution of partnership property to a partnership followed by a distribution of partnership interests — would remain tax-free under IRC §§ 721(a) and 731(a).

C. The Partnership Anti-Abuse Rule — Treas. Reg. § 1.701-2

Treas. Reg. § 1.701-2(a) — Intent of Subchapter K

Treasury Regulations § 1.701-2(a) sets forth the underlying policy of Subchapter K, providing that:

Subchapter K is intended to permit taxpayers to conduct joint business (including investment) activities through a flexible economic arrangement without incurring an entity-level tax. Implicit in the intent of Subchapter K are the following requirements: (1) the partnership must be bona fide and each partnership transaction or series of related transactions (individually or collectively, the "transaction") must be entered into for a substantial business purpose; (2) the form of each partnership transaction must be respected under substance over form principles; and (3) the tax consequences under Subchapter K to each partner of partnership operations and of transactions between the partner and the partnership must accurately reflect the partners' economic agreement and clearly reflect the partners' income.

Treas. Reg. § 1.701-2(b) — General Anti-Abuse Rule

Treasury Regulations § 1.701-2(b) provides the operative anti-abuse rule:

If a partnership is formed or availed of in connection with a transaction a principal purpose of which is to reduce substantially the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent of Subchapter K, the Commissioner can recast the transaction for federal tax purposes as appropriate to achieve tax results that are consistent with the intent of Subchapter K, in light of the applicable statutory and regulatory provisions and the pertinent facts and circumstances.

The regulation provides the Commissioner with broad authority to recast transactions, including: (i) treating the partnership as an aggregate of its partners in whole or in part, (ii) treating one or more of the partners of the partnership as not a partner, (iii) adjusting the method of accounting used by the partnership or a partner, (iv) reallocating items of income, gain, loss, deduction, or credit among the partners, and (v) otherwise adjusting the claimed tax treatment.

Treas. Reg. § 1.701-2(c) — Factors Considered

Treasury Regulations § 1.701-2(c) provides that in determining whether the Partnership Anti-Abuse Rule applies, the Commissioner will consider all relevant facts and circumstances, including:

(1) whether the partnership was formed or availed of with a principal purpose of substantially reducing the present value of the partners' aggregate federal tax liability;

(2) the present value of the partners' aggregate federal tax liability if the purported partnership is respected, compared to what it would be in the absence of the partnership;

(3) whether the purported business purpose for a transaction is clearly outweighed by the tax-avoidance motive; and

(4) whether the result produced by the transaction is consistent with the intent of applicable provisions of Subchapter K (including, without limitation, §§ 704(b), 704(c), 721, 731, and 752) and the regulations thereunder.

Treas. Reg. § 1.701-2(d) — Abuse of Entity Treatment

Treasury Regulations § 1.701-2(d) addresses a specific category of abuse — the use of the partnership form to circumvent the intent of provisions of the Code that are not within Subchapter K but that are affected by the use of a partnership. Under § 1.701-2(d), if a partnership is formed or availed of in connection with a transaction a principal purpose of which is to reduce substantially the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent of an applicable provision of the Code (not limited to Subchapter K provisions), the Commissioner may treat the partnership as an aggregate of its partners, in whole or in part, as appropriate to carry out the intent of the applicable provision.

Application to Fund Reorganizations

The Partnership Anti-Abuse Rule has been applied sparingly in the context of legitimate fund restructurings. The regulation was promulgated in 1995 primarily in response to concerns about abusive partnership transactions — including transactions involving artificial basis inflation, loss trafficking, and abusive allocation arrangements — that exploited the flexibility of partnership taxation to produce results Congress did not intend. The regulation was not designed to second-guess bona fide business restructurings in which the partnership form is used for its intended purpose of facilitating joint business activities among partners in a tax-efficient manner.

The preamble to the final regulations noted that the anti-abuse rule is intended to be invoked only in situations where the use of the partnership form produces results that are clearly inconsistent with the intent of Subchapter K, and not in situations where the taxpayer has made legitimate use of the partnership provisions. As discussed in Section VI below, the Solara reorganization falls squarely within the latter category.

IV. Analysis: Substance-Over-Form Doctrine

A. Economic Substance of the Reorganization

The proposed reorganization fundamentally alters Solara's economic position by consolidating four separate legal entities — organized and operating across three different jurisdictions (the Cayman Islands, Luxembourg, and, following the reorganization, the United States) — into a single master fund structure with two feeder vehicles. This is not a cosmetic or circular restructuring in which the same assets are held by the same parties in essentially the same form. Rather, the reorganization effects a genuine transformation of the legal, regulatory, and operational architecture of Solara's fund platform, with tangible economic consequences that extend well beyond any tax effects.

The tangible economic consequences of the reorganization include the following:

Cost Savings. The consolidation of four separate offshore vehicles into the Master Fund and two feeders will eliminate approximately $3.8 million per year in duplicative offshore administration, audit, registered office, regulatory, and legal compliance costs. This figure has been documented in a detailed cost analysis prepared by Douglas Wexford (CFO) and Stefan Dalmqvist (Head of Tax) and reviewed by Caldwell Pierce & Co. LLP. The cost savings are recurring and substantial, representing a meaningful reduction in the overhead expense of the fund platform. Over a ten-year projected remaining fund life, the present value of these cost savings (Discounted at a 7% rate) exceeds $26 million.

Regulatory Compliance. The reorganization reduces Solara's exposure to the OECD Pillar Two GloBE rules, which become effective for the Luxembourg SCSp entities beginning with fiscal year 2025. Under the GloBE framework, the Luxembourg SCSps would be subject to a 15% global minimum effective tax rate, potentially increasing the effective tax rate on income recognized through the Luxembourg structures and thereby diminishing the tax and regulatory advantages that justified the establishment of those structures. By dissolving the Luxembourg SCSps and consolidating their assets into the Delaware-domiciled Master Fund, Solara eliminates the application of the GloBE rules to those entities entirely. This is a material change in Solara's regulatory and economic posture that would be valuable irrespective of any U.S. federal income tax consequences.

Operational Efficiency. The reorganization reduces the number of separate sets of financial statements, tax returns, Schedule K-1 packages, FATCA and CRS filings, and regulatory reports from six fund vehicles (four offshore, two domestic) to a streamlined master-feeder structure consisting of the Master Fund, two feeders, and two domestic co-investing funds. This simplification reduces the risk of reporting errors, decreases the burden on Solara's in-house finance and tax teams, and allows the redeployment of internal resources from compliance activities to value-generating investment activities.

Governance. The reorganization creates a single governance framework through the Consolidated Master Fund LP limited partnership agreement, replacing the current patchwork of six separate governing documents (two Delaware LPAs, two Cayman exempted limited partnership agreements, and two Luxembourg SCSp partnership agreements, each governed by different substantive law and containing different governance, fee, carry, and reporting provisions). This streamlined governance structure reduces the administrative burden on LPs — particularly large institutional investors holding commitments across multiple vehicles — and improves transparency and consistency in the application of fund terms.

These changes are meaningful economic alterations to Solara's position that exist entirely apart from any federal income tax effects. The reorganization would be economically justified even if it produced no tax benefits whatsoever.

B. Substantial Non-Tax Business Purpose

Four independent, substantial non-tax business purposes support the reorganization. Each is independently sufficient to satisfy the "substantial purpose" prong of the economic substance doctrine, and their collective weight makes the case overwhelming.

First: Operational Cost Reduction ($3.8 Million Annually). As documented in the cost analysis prepared by the Solara in-house team and reviewed by Caldwell Pierce & Co. LLP, the reorganization will eliminate approximately $3.8 million per year in duplicative offshore costs. These cost savings are distributed across multiple categories — fund administration (Clarendon Fund Services Ltd. fees), audit (Caldwell Pierce & Co. LLP fees for separate offshore vehicle audits), legal compliance (Meridian Offshore Legal and Veldhuis & Gérard S.à r.l. ongoing retainers for the Cayman and Luxembourg vehicles, respectively), registered office services (Harborstone Corporate Services Ltd.), and regulatory fees (CIMA and CSSF registration and reporting fees). The cost savings are not speculative or contingent; they are based on actual contractual obligations that will terminate upon dissolution of the legacy offshore vehicles.

Second: OECD Pillar Two GloBE Compliance. The forthcoming Pillar Two rules (effective for Solara's Luxembourg entities from FY 2025) impose a 15% global minimum effective tax rate on constituent entities of multinational enterprise groups meeting the revenue threshold. The Luxembourg SCSps were originally established to provide treaty access and regulatory advantages for non-U.S. investors, but the imposition of the GloBE top-up tax substantially diminishes these advantages. Continuing to maintain the Luxembourg structures in the face of the GloBE rules would be economically irrational — the structures would impose ongoing administrative and regulatory costs without delivering their intended benefits. The Pillar Two impact assessment, prepared by Stefan Dalmqvist and reviewed by Caldwell Pierce & Co. LLP, quantifies the expected top-up tax exposure and confirms that dissolution of the Luxembourg vehicles is warranted on purely economic grounds.

Third: FATCA/CRS Simplification. The reduction in the number of separate reporting entities subject to independent FATCA and CRS reporting obligations decreases compliance costs, reduces the risk of reporting errors and the associated penalty exposure, and simplifies the coordination among Solara's internal compliance function and its external service providers. The FATCA/CRS compliance burden has increased significantly in recent years as the number of participating jurisdictions has expanded and as the reporting requirements have become more detailed, making simplification of the reporting infrastructure increasingly valuable.

Fourth: LP-Requested Governance Simplification. The LPAC voted on April 22, 2025, with 78% in interest consenting, to support the proposed reorganization. This vote followed a presentation by the Solara team and a review by LPAC counsel, Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner), which independently evaluated the reorganization framework and endorsed it on governance and efficiency grounds. The LPAC vote reflects genuine investor demand — driven by the administrative burden of monitoring and governing multiple parallel fund vehicles — for a simplified structure. The independent endorsement by LPAC counsel, a law firm with no economic interest in the outcome, further corroborates the bona fide nature of the governance rationale.

C. Analysis Under IRC § 7701(o)

Applying the codified two-prong economic substance test of IRC § 7701(o) to the proposed reorganization:

Prong 1 — Meaningful Change in Economic Position. The reorganization materially changes Solara's economic position apart from federal income tax effects. The fund platform moves from six parallel vehicles organized across three jurisdictions to a streamlined master-feeder structure with two feeders and two co-investing domestic funds. Approximately $7.75 billion in portfolio assets are transferred and consolidated. Liabilities totaling $1.34 billion are reallocated from four separate offshore entities to a single domestic entity. Administrative costs decrease by approximately $3.8 million annually. The regulatory posture of the fund platform changes fundamentally with respect to the OECD Pillar Two GloBE rules, CIMA registration requirements, and CSSF reporting obligations. These are real, concrete changes in economic position that would be material to any reasonable investor or fund manager.

Prong 2 — Substantial Non-Tax Purpose. The four non-tax business purposes described above are each independently substantial. They are documented in contemporaneous business records, including the GP board resolution of March 14, 2025 (approving exploration of the reorganization), the LPAC presentation materials dated April 11, 2025, the cost analysis prepared by Douglas Wexford and Stefan Dalmqvist, the Pillar Two impact assessment, and the LPAC meeting minutes of April 22, 2025 (recording the 78% preliminary consent vote). The contemporaneous documentation of business purpose is an important factor in IRS and judicial analysis, and Solara's records are thorough and consistent.

Conclusion. The proposed reorganization satisfies both prongs of the economic substance doctrine under IRC § 7701(o). The IRS would not have a viable basis for challenging the transaction under the substance-over-form doctrine. The reorganization has genuine economic substance, changes Solara's economic position in meaningful ways apart from tax effects, and is motivated by four independently substantial non-tax business purposes.

V. Analysis: Step Transaction Doctrine

A. Application of the Three Tests

1. End Result Test

The five steps of the proposed reorganization are coherently planned and documented as a coordinated reorganization with a defined target end result: the consolidation of four offshore fund vehicles into the Consolidated Master Fund LP, with the establishment of two Cayman feeder partnerships for non-U.S. and U.S. tax-exempt investors, respectively. The GP board resolution of March 14, 2025 approved "exploration" of the reorganization as a unified restructuring program, and the LPAC presentation of April 11, 2025 described the reorganization as a coordinated multi-step process. There is no question that the steps were conceived as parts of an overall plan.

Under the end result test — the broadest of the three step transaction tests — the IRS could potentially argue that Steps 1 through 5 should be collapsed into a single integrated transaction on the theory that they were prearranged parts of a single plan intended to reach a predetermined end result. This is the test most likely to be invoked by the IRS, and the test most likely to result in collapsing.

However, even if the IRS were to successfully invoke the end result test and collapse all five steps into a single transaction, the tax result would not change. The collapsed transaction would still constitute: (a) the formation of new partnership entities (a non-taxable event), (b) the contribution of portfolio assets by four offshore partnerships to a domestic partnership (the Consolidated Master Fund LP) in exchange for partnership interests (tax-free under IRC § 721(a)), and (c) the distribution of those partnership interests to the limited partners of the offshore vehicles upon dissolution (tax-free under IRC § 731(a)). The intermediate steps do not create any tax benefit that would be lost or altered if the transaction were viewed as a single integrated event. There is no "whipsaw" effect and no inconsistency between the step-by-step tax treatment and the collapsed treatment.

Furthermore, each step involves different contributing entities (different offshore vehicles contributing on different dates — October 1, October 15, and November 1, 2025), different portfolios of assets, and different investor bases. The sequencing of the steps is not arbitrary or tax-motivated; rather, it reflects genuine operational, legal, and regulatory constraints. The Cayman vehicles require different dissolution procedures (coordinated with Meridian Offshore Legal and Fiona McAllister under Cayman Islands law) than the Luxembourg SCSps (coordinated with Veldhuis & Gérard S.à r.l. and Marc Gérard under Luxembourg law, and requiring CSSF notification and tax clearance). Fund IV and Fund V are different vintage funds with different partnership agreements, different LP bases, different deployment levels, and different credit facility arrangements. These real-world constraints dictate the sequencing, not tax avoidance.

2. Interdependence Test

Under the interdependence test, the key question is whether the individual steps in the reorganization are "so interdependent that the legal relations created by one transaction would have been fruitless without a completion of the series." We analyze each step below.

Step 1 (Formation of New Entities). The formation of the new entities — the Master Fund GP LLC, the Consolidated Master Fund LP, the International Feeder, and the Tax-Exempt Feeder — is a necessary predicate to the subsequent contribution steps. Without the new entities, there would be no recipient for the contributed assets. However, the formation step has independent administrative and legal significance: it involves filing certificates of formation and certificates of limited partnership with the Delaware Secretary of State, Cayman formations through Meridian Offshore Legal, the preparation and execution of governing documents (the Master Fund LPA, the GP LLC operating agreement, the feeder LP agreements), the establishment of capital account structures and partnership allocation provisions, the obtaining of EINs from the IRS, and the filing of Form 8832 elections. These are all significant legal and administrative events that exist independently of whether the subsequent steps are completed.

Steps 2 and 3 (Fund IV Offshore Contributions). Each of the Fund IV offshore contributions is operationally independent. Fund IV-A Cayman operates under Cayman Islands law, holds a distinct portfolio (including NovaBright Data Systems Inc. and Thorngate Fiber Networks LP), and serves a different investor base than Fund IV-B Lux, which operates under Luxembourg law and holds a different portfolio (including Crestline Cloud Solutions LLC). The contribution of Fund IV-A Cayman's assets does not depend on Fund IV-B Lux's contribution, and vice versa. Even if only one offshore vehicle were consolidated — for example, if the Luxembourg SCSps were dissolved in response to Pillar Two but the Cayman vehicles were retained — the reorganization would achieve cost savings and governance benefits for that vehicle alone. Neither step is "fruitless" without the other.

Step 4 (Fund V Offshore Contributions). Similarly, the Fund V offshore contributions are independent of the Fund IV contributions. Fund V-A Cayman and Fund V-B Lux are vehicles of a different vintage (2023 versus 2021), with a different deployment level (38% versus 72%), different LP commitments, different partnership agreements, and different credit facility arrangements (the Fund V subscription facility involves both Ashford National Bank, N.A. and Sentinel Capital Markets LLC as co-lender and administrative agent, whereas the Fund IV facility involves only Ashford National Bank). Either could be consolidated independently of the other, and either Fund V vehicle could be consolidated independently of the Fund IV vehicles.

Step 5 (Dissolution and LP Migration). The dissolution of each legacy vehicle is a consequence of its having contributed all of its assets to the Master Fund, but dissolution is a legally and economically distinct event from contribution. Under both Cayman Islands law and Luxembourg law, the dissolution of a partnership involves separate legal procedures — including filings with regulatory authorities (CIMA for Cayman vehicles; RCS and CSSF for Luxembourg vehicles), final audits, settlement of obligations, and distribution of remaining assets. The dissolution is not merely a

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Leonard Cross, Partner; Sylvia Hartwell, Partner — Calderwood & Harkness LLP
FROM: Robert Jansen, Lead Associate; Garrett Simmons, Working Associate — Calderwood & Harkness LLP
DATE: June 16, 2025
RE: Solara Digital Infrastructure LP — Cross-Border Fund-Platform Reorganization: Anti-Abuse Considerations (Substance-Over-Form Doctrine, Step Transaction Doctrine, and Treas. Reg. § 1.701-2 Partnership Anti-Abuse Rule)
ENGAGEMENT: Matter No. 20250527-SDILP-PLR
CLIENT: Solara Digital Infrastructure LP (EIN 82-4917366)
Right-click to update Table of Contents
I. Executive Summary
This memorandum analyzes whether the Internal Revenue Service ("IRS") could successfully challenge the proposed five-step cross-border reorganization of Solara Digital Infrastructure LP's ("Solara" or the "Sponsor") fund platform under three judicial and regulatory anti-abuse doctrines: (1) the substance-over-form doctrine (including its codification in IRC § 7701(o)), (2) the step transaction doctrine, and (3) the partnership anti-abuse rule of Treasury Regulations § 1.701-2 (the "Partnership Anti-Abuse Rule"). This memorandum has been prepared in connection with the firm's engagement to prepare a private letter ruling ("PLR") request on behalf of Solara, and the analysis set forth herein will inform the representations and legal discussion included in that submission.
The proposed reorganization involves the domestication and consolidation of four offshore fund vehicles — Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman"), Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux"), Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman"), and Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux") — into a newly formed Delaware-domiciled master fund structure, Solara Consolidated Master Fund LP (the "Master Fund" or "Consolidated Master Fund LP"), together with two newly formed Cayman Islands feeder partnerships: Solara International Feeder (Cayman) LP (the "International Feeder") and Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"). The reorganization is to be implemented through a five-step sequence, with a target effective date of December 1, 2025.
The aggregate fair market value ("FMV") of assets being transferred to the Consolidated Master Fund LP is approximately $7.75 billion, with an aggregate adjusted tax basis of approximately $6.03 billion, resulting in total built-in gain of approximately $1.72 billion. Aggregate liabilities to be assumed by the Master Fund are approximately $1.34 billion. The transferred assets include equity and debt interests in twenty-three portfolio companies across digital infrastructure (data centers, fiber-optic networks, edge computing) and enterprise SaaS verticals.
Conclusion. Based on the analysis set forth in this memorandum, we conclude that the IRS would not have a viable basis for challenging the proposed reorganization under any of the three anti-abuse doctrines examined. Our conclusions, in summary, are as follows:
Substance-Over-Form / Economic Substance (IRC § 7701(o)). Each of the five steps in the proposed reorganization has an independent business purpose and meaningful economic substance beyond tax benefits. The reorganization is driven by substantial non-tax motivations — principally operational cost reduction of approximately $3.8 million annually, forthcoming OECD Pillar Two GloBE compliance, FATCA/CRS reporting simplification, and LP-requested governance consolidation. Both prongs of the codified economic substance doctrine under IRC § 7701(o) are satisfied.
Step Transaction Doctrine. Even if the IRS were to collapse the five steps under the step transaction doctrine (applying any of the three judicial tests — end result, interdependence, or binding commitment), the overall result — a tax-free contribution of partnership assets to a partnership under IRC § 721(a) followed by a tax-free distribution of partnership interests under IRC § 731(a) — would remain consistent with the intended tax treatment. The stepped approach reflects genuine operational, jurisdictional, and regulatory requirements rather than a tax-motivated sequencing, and no binding commitment exists at Step 1 to complete all subsequent steps. Importantly, "collapsing" the steps is harmless because the collapsed transaction would receive the same nonrecognition treatment as the stepped transaction.
Partnership Anti-Abuse Rule (Treas. Reg. § 1.701-2). The Partnership Anti-Abuse Rule does not apply because the transaction does not produce results inconsistent with the intent of Subchapter K, and the use of the partnership form is integral to the legitimate fund management structure rather than a tax-avoidance device. The Consolidated Master Fund LP, the International Feeder, and the Tax-Exempt Feeder are each bona fide partnerships conducting genuine investment management activities, and the reorganization is not undertaken for a principal purpose of reducing the aggregate federal tax liability of the partners.
We recommend proceeding with the PLR request and incorporating the representations and analyses described in Section X of this memorandum.
II. Factual Background
A. Existing Fund Structure
Solara Digital Infrastructure LP is a Delaware limited partnership founded on March 17, 2014, with its principal office located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara operates as a private equity sponsor focused on digital infrastructure — specifically, data centers, fiber-optic networks, and edge computing facilities — and enterprise software-as-a-service ("SaaS") businesses. As of March 31, 2025, Solara manages approximately $14.7 billion in aggregate assets under management ("AUM") across multiple fund vehicles and co-investment structures.
The general partner of Solara Digital Infrastructure LP is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company managed by Viktor Raines, Managing Partner and Founder. Mr. Raines has served as Managing Partner since Solara's inception and is the sole Class A member of the GP LLC, with Priya Narasimhan (General Counsel), Stefan Dalmqvist (Head of Tax), and Douglas Wexford (Chief Financial Officer) serving as Class B members with advisory voting rights on specified matters.
Solara currently operates its fund platform through six parallel fund vehicles organized across three jurisdictions. This parallel structure was originally designed to accommodate the tax, regulatory, and legal requirements of different categories of investors, as described more fully below.
Delaware (U.S. Taxable Investors):
Fund IV LP (EIN 85-2103748). Solara Digital Partners Fund IV LP ("Fund IV LP") is a Delaware limited partnership with approximately $4.2 billion in committed capital. Fund IV LP has a 2021 vintage and is approximately 72% deployed as of March 31, 2025. Fund IV LP was formed to accommodate U.S. taxable investors, including high-net-worth individuals, family offices, and taxable institutional investors, who invest directly in a partnership that passes through income, gain, loss, and deduction items for U.S. federal income tax purposes.
Fund V LP (EIN 88-3467219). Solara Digital Partners Fund V LP ("Fund V LP") is a Delaware limited partnership with approximately $5.6 billion in committed capital. Fund V LP has a 2023 vintage and is approximately 38% deployed as of March 31, 2025. Fund V LP serves the same investor demographic as Fund IV LP but represents Solara's more recent fundraise.
Cayman Islands (Non-U.S. and U.S. Tax-Exempt Investors):
Fund IV-A (Cayman) LP (EIN 98-6241503; CIMA Registration MF-72491). Solara Digital Partners Fund IV-A (Cayman) LP is an exempted limited partnership organized under the laws of the Cayman Islands, with approximately $1.85 billion in committed capital. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company. The registered office of Fund IV-A Cayman is Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111.
Fund V-A (Cayman) LP (EIN 98-7891234; CIMA Registration MF-89103). Solara Digital Partners Fund V-A (Cayman) LP is an exempted limited partnership organized under the laws of the Cayman Islands, with approximately $2.45 billion in committed capital. Fund V-A Cayman operates under the same general partner and registered office arrangements as Fund IV-A Cayman.
Luxembourg (Non-U.S. Investors with Treaty and Regulatory Requirements):
Fund IV-B (Luxembourg) SCSp (EIN 98-6241571; Registre de Commerce et des Sociétés ("RCS") B 248193). Solara Digital Partners Fund IV-B (Luxembourg) SCSp is a Luxembourg special limited partnership (société en commandite spéciale) with approximately €1.15 billion in committed capital (equivalent to approximately $1.24 billion at an exchange rate of 1.08 EUR/USD). The gérant (managing general partner) is Solara Luxembourg Management S.à r.l. (RCS B 248194), a Luxembourg private limited liability company. The registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg.
Fund V-B (Luxembourg) SCSp (EIN 98-7891267; RCS B 271056). Solara Digital Partners Fund V-B (Luxembourg) SCSp is a Luxembourg SCSp with approximately €1.38 billion in committed capital (equivalent to approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux operates under the same managing general partner as Fund IV-B Lux.
The historical rationale for this parallel multi-vehicle structure is as follows. U.S. taxable investors invest through the Delaware main funds (Fund IV LP and Fund V LP), which are treated as pass-through partnerships for U.S. federal income tax purposes. U.S. tax-exempt investors — including public pension funds, university endowments, and charitable foundations — have historically invested through the Cayman vehicles to achieve certain benefits with respect to unrelated business taxable income ("UBTI") through the use of blocker structures that are interposed between the tax-exempt investors and operating business income. Non-U.S. investors — including sovereign wealth funds, insurance companies, and non-U.S. pension funds — have invested through either the Cayman vehicles (for investors in jurisdictions without applicable tax treaties) or the Luxembourg vehicles (for investors requiring access to Luxembourg's network of tax treaties or regulatory frameworks, such as the EU-mandated regulatory regime applicable to alternative investment fund managers).
This parallel structure, while serving legitimate investor-facing purposes, has resulted in significant operational complexity and cost, which is discussed more fully in Section II.F below.
B. Key Investors (Representative)
The following is a representative sample of the key investors across Solara's fund platform, provided for context in evaluating the business rationale for the reorganization and the diversity of investor types that the structure must accommodate:
Pinnacle State Employees' Retirement System (U.S. public pension fund). Pinnacle has committed $275 million to Fund IV and $340 million to Fund V, for aggregate commitments of $615 million. The Chief Investment Officer is Margaret Faulkner. Pinnacle invests through the Cayman vehicles as a tax-exempt investor seeking UBTI protection.
Grandview University Endowment (U.S. tax-exempt endowment). Grandview has committed $120 million to Fund IV and $185 million to Fund V, for aggregate commitments of $305 million. The Director of the Endowment is Harold Kingsley. Grandview invests through the Cayman vehicles for substantially the same UBTI-related reasons as Pinnacle.
Nordhaven Sovereign Wealth Fund (non-U.S. sovereign investor, Kingdom of Nordhaven). Nordhaven SWF has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman, for aggregate commitments of $880 million. The principal contact is Anders Bjørkman, Chief Portfolio Manager. Nordhaven invests through the Cayman vehicles as a non-U.S. sovereign investor not subject to U.S. federal income tax under IRC § 892 on certain categories of income. Nordhaven has retained independent tax counsel, Bramhall & Quelwick LLP (Jason Tremaine, Partner), to review the proposed reorganization from Nordhaven's perspective.
Kestrel Pacific Insurance Group (non-U.S. insurer, Singapore). Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux, for aggregate commitments of €475 million (approximately $513 million at 1.08 EUR/USD). The principal contact is Christine Leung, Head of Alternative Investments. Kestrel invests through the Luxembourg vehicles for regulatory and treaty-related reasons.
Argyle Family Office Holdings LLC (U.S. taxable family office). Argyle has committed $95 million to Fund IV and $130 million to Fund V, for aggregate commitments of $225 million. The Principal is Elliot Argyle. Argyle invests directly through the Delaware main funds as a U.S. taxable investor.
C. The Proposed Five-Step Reorganization
The proposed reorganization is designed to consolidate Solara's four offshore fund vehicles into a single Delaware-domiciled master fund with two Cayman feeder partnerships, while preserving the separate existence of the two Delaware main funds (Fund IV LP and Fund V LP) as co-investing vehicles alongside the Master Fund. The reorganization will be implemented through five sequential steps, each of which is described below. The target effective date for completion of the entire reorganization is December 1, 2025.
Step 1 — Formation of New Entities (Target: September 15, 2025)
The first step involves the formation of the following new entities:
(a) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company to be formed by filing a Certificate of Formation with the Delaware Secretary of State. This entity will serve as the general partner of the Consolidated Master Fund LP.
(b) Solara Consolidated Master Fund LP (the "Master Fund"), a Delaware limited partnership to be formed by filing a Certificate of Limited Partnership with the Delaware Secretary of State. The Master Fund will be the central holding entity for all portfolio assets currently held by the four offshore vehicles.
(c) Solara International Feeder (Cayman) LP (the "International Feeder"), an exempted limited partnership to be organized under the laws of the Cayman Islands. The International Feeder will serve as the investment vehicle for non-U.S. investors who are currently invested through the Cayman and Luxembourg offshore vehicles.
(d) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), an exempted limited partnership to be organized under the laws of the Cayman Islands. The Tax-Exempt Feeder will serve as the investment vehicle for U.S. tax-exempt investors who are currently invested through the Cayman offshore vehicles.
Immediately upon formation, Form 8832 (Entity Classification Election) will be filed under Treasury Regulations § 301.7701-3 for each new entity to elect treatment as a partnership for U.S. federal income tax purposes. The Delaware entities will be formed using Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904, as registered agent. The Cayman entities will be formed through Meridian Offshore Legal, with Fiona McAllister serving as lead counsel for the Cayman formations.
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 a limited partnership interest in the Master Fund. The aggregate FMV of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in built-in gain of approximately $690 million. Key portfolio companies included in this contribution are:
(a) NovaBright Data Systems Inc. — FMV of $890 million; adjusted tax basis of $520 million; built-in gain of $370 million. NovaBright is held 60% by Fund IV-A Cayman and 40% by Fund IV LP.
(b) Thorngate Fiber Networks LP — FMV of $670 million; adjusted tax basis of $490 million; built-in gain of $180 million. Thorngate is held 100% by Fund IV-A Cayman.
The contribution will be treated as a tax-free contribution under IRC § 721(a), with the Master Fund taking a carryover basis in the contributed assets under IRC § 723 and tacking the contributing fund's holding period under IRC § 1223(2). Section 704(c) accounts will be established to preserve the built-in gain attributable to each contributed asset.
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 a limited partnership interest in the Master Fund. The aggregate FMV of the contributed assets is approximately €1.07 billion ($1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million ($844.6 million), resulting in built-in gain of approximately €288 million ($311 million). A key portfolio company included in this contribution is:
Crestline Cloud Solutions LLC — FMV of €340 million ($367 million); adjusted tax basis of €195 million ($211 million); built-in gain of €145 million ($156 million). Crestline is held 100% by Fund IV-B Lux.
The contribution will be treated as a tax-free contribution under IRC § 721(a), with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). Luxembourg tax clearance is required in connection with this step, and Veldhuis & Gérard S.à r.l. (Marc Gérard, Partner) has confirmed that no Luxembourg capital gains tax is expected to arise under Article 3(2) of the Luxembourg law of July 12, 2013.
Step 4 — Fund V Offshore Contributions (Target: November 1, 2025)
Both Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Master Fund.
(a) Fund V-A (Cayman) LP will contribute assets with an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and built-in gain of approximately $550 million. Key portfolio companies include:
Veridian Edge Computing Corp. — FMV of $1.12 billion; adjusted tax basis of $780 million; built-in gain of $340 million. Veridian is held 55% by Fund V-A Cayman and 45% by Fund V LP.
Helix SaaS Holdings Ltd. — FMV of $445 million; adjusted tax basis of $310 million; built-in gain of $135 million. Helix is held 100% by Fund V-A Cayman.
(b) Fund V-B (Luxembourg) SCSp will contribute assets with an aggregate FMV of approximately €1.29 billion ($1.39 billion at 1.08 EUR/USD), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and built-in gain of approximately €150 million ($162 million).
Each contribution will be treated as a tax-free contribution under IRC § 721(a), with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). Section 704(c) accounts will be established for all contributed assets with built-in gain or built-in loss.
Step 5 — Dissolution and LP Migration (Target: December 1, 2025)
Following the completion of Steps 2 through 4, the four legacy offshore vehicles (Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux) will dissolve and distribute their sole remaining assets — their respective limited partnership interests in the Consolidated Master Fund LP — to their respective limited partners. The distributions will be treated as tax-free distributions of partnership property under IRC § 731(a).
Upon receipt of their Master Fund LP interests, the limited partners of the dissolving vehicles will be directed to the appropriate feeder vehicle based on their investor category:
(a) Non-U.S. limited partners (including the Nordhaven Sovereign Wealth Fund and Kestrel Pacific Insurance Group) will contribute their Master Fund LP interests to the International Feeder (Cayman) LP.
(b) U.S. tax-exempt limited partners (including the Pinnacle State Employees' Retirement System and Grandview University Endowment) will contribute their Master Fund LP interests to the Tax-Exempt Feeder (Cayman) LP.
U.S. taxable investors (such as Argyle Family Office Holdings LLC) will remain directly invested in Fund IV LP and Fund V LP, which will continue to co-invest alongside the Master Fund in the underlying portfolio companies.
The dissolution of each legacy vehicle will be effected in accordance with its governing law — Cayman Islands law for Fund IV-A Cayman and Fund V-A Cayman (coordinated with Meridian Offshore Legal and Fiona McAllister) and Luxembourg law for Fund IV-B Lux and Fund V-B Lux (coordinated with Veldhuis & Gérard S.à r.l. and Marc Gérard). Regulatory deregistrations will be filed with CIMA (for the Cayman vehicles) and the CSSF (for the Luxembourg vehicles).
D. Aggregate Financial Summary of the Reorganization
The following table summarizes the aggregate financial dimensions of the proposed reorganization:
The magnitude of the assets, liabilities, and built-in gains involved underscores both the significance of the reorganization and the importance of obtaining IRS confirmation of the intended tax treatment through the PLR process.
E. Intended Tax Treatment
The intended U.S. federal income tax treatment of each step in the proposed reorganization is as follows:
Steps 2 through 4 (Contributions). The contribution of portfolio assets by each of the four legacy offshore vehicles to the Consolidated Master Fund LP will be treated as a tax-free contribution of property to a partnership in exchange for a partnership interest under IRC § 721(a). The Master Fund will take a carryover basis in each contributed asset under IRC § 723, and the Master Fund's holding period for each asset will include the contributing fund's holding period under IRC § 1223(2). Built-in gain and built-in loss accounts will be established and maintained under IRC § 704(c) using the remedial allocation method prescribed by Treasury Regulations § 1.704-3(d).
Step 5 (Distributions and Dissolution). The distribution by each dissolving legacy vehicle of its Master Fund LP interest to its respective limited partners will be treated as a tax-free distribution of partnership property under IRC § 731(a). No gain will be recognized by any partner unless the money distributed exceeds the partner's adjusted basis in its partnership interest, and no money is expected to be distributed in connection with Step 5.
The PLR request will seek eight specific rulings from the IRS covering the following provisions: IRC §§ 721(a) (nonrecognition on contributions), 721(b) (investment company exception inapplicability), 367 (inapplicability of outbound transfer rules), 731(a) and 731(c) (nonrecognition on distributions), 752 (treatment of liability assumptions and releases), 704(c) (allocation of built-in gains), 1446 (withholding on effectively connected income), and entity classification under Treasury Regulations § 301.7701-3 (confirmation of partnership classification for each new entity).
F. Business Rationale for the Reorganization
The reorganization is motivated by four independent, substantial non-tax business purposes, each of which is documented in contemporaneous business records, including the GP board resolution of March 14, 2025, the LPAC presentation materials dated April 11, 2025, and the engagement scope memorandum prepared by the Solara in-house team.
(i) Operational Cost Reduction
Solara currently incurs approximately $3.8 million annually in duplicative offshore administration, audit, regulatory, and legal compliance costs associated with maintaining four parallel offshore fund vehicles across two foreign jurisdictions. Consolidating these vehicles into the Master Fund and the two feeder structures will eliminate the following categories of duplicative expense:
Fund administration. Clarendon Fund Services Ltd. currently provides separate fund administration services to each of the four offshore vehicles, including NAV calculation, investor reporting, capital call processing, and distribution processing. The annual cost of maintaining four separate administration mandates (as opposed to a consolidated mandate for the Master Fund and feeders) is approximately $1.4 million.
Audit. Caldwell Pierce & Co. LLP currently performs separate annual audits of each of the four offshore vehicles, in addition to the audits of Fund IV LP and Fund V LP. Elimination of four separate offshore audit engagements (replaced by a single Master Fund audit, plus limited-scope audits of the two feeders) is expected to save approximately $900,000 annually.
Legal compliance. Meridian Offshore Legal (Cayman) and Veldhuis & Gérard S.à r.l. (Luxembourg) currently maintain separate ongoing retainer relationships with each of the Cayman and Luxembourg vehicles, respectively, for regulatory compliance, AML/KYC maintenance, FATCA/CRS reporting, and general corporate upkeep. Consolidation is expected to reduce these costs by approximately $750,000 annually.
Registered office services. Harborstone Corporate Services Ltd. provides registered office services to each of the two Cayman vehicles under separate engagement letters. Consolidation of the Cayman vehicles into the two feeder structures will eliminate one set of registered office fees, saving approximately $150,000 annually.
Regulatory fees and filings. CIMA registration maintenance fees for two separate Cayman vehicles, and CSSF notification and reporting costs for two separate Luxembourg vehicles, total approximately $600,000 annually. Deregistration of the four legacy vehicles and registration of the two feeders will result in a net reduction in ongoing regulatory costs.
The aggregate annual cost savings of approximately $3.8 million have been documented in a detailed cost analysis prepared by Douglas Wexford (CFO) and Stefan Dalmqvist (Head of Tax), which will be included as an exhibit to the PLR request.
(ii) OECD Pillar Two GloBE Rules
The OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules, as implemented in Luxembourg through the Grand-Ducal Regulation transposing EU Council Directive 2022/2523, become effective for Solara's Luxembourg entities beginning with fiscal year 2025. The GloBE rules impose a 15% global minimum effective tax rate on constituent entities of multinational enterprise groups with consolidated group revenues exceeding €750 million in at least two of the four preceding fiscal years. Solara's Luxembourg SCSp structures were originally established to provide treaty access and regulatory advantages for non-U.S. investors. The imposition of the GloBE minimum tax substantially diminishes the benefits of maintaining these Luxembourg structures, because the SCSps will now be subject to top-up tax to the extent their effective tax rate falls below 15%. Continuing to maintain the Luxembourg SCSps has therefore become economically irrational irrespective of U.S. tax consequences, and the Pillar Two impact assessment prepared by Stefan Dalmqvist and reviewed by Caldwell Pierce & Co. LLP supports the conclusion that dissolution of the Luxembourg structures is warranted on a purely non-tax basis.
(iii) FATCA and CRS Compliance Simplification
The maintenance of four separate offshore entities — each of which constitutes a separate "reporting financial institution" or "reporting entity" for purposes of the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS") — requires the preparation and filing of separate FATCA reports (including Forms 8966 and, in certain cases, Forms W-8BEN-E or W-8IMY for investors) and CRS reports with the applicable tax information exchange authorities. Consolidating the four offshore vehicles into the Master Fund and two feeders will reduce the number of separate FATCA and CRS reporting obligations, decrease the risk of reporting errors and inconsistencies, and lower the overall compliance burden on Solara's in-house tax and operations teams.
(iv) LP-Requested Governance Simplification
Solara's Limited Partner Advisory Committee ("LPAC"), which consists of representatives of the fund's largest institutional investors, has for several years requested that Solara streamline its governance structure across the parallel fund vehicles. The parallel structure requires each vehicle to maintain separate limited partnership agreements (or, in the case of the Luxembourg SCSps, separate partnership agreements governed by Luxembourg law), separate advisory committee structures, separate investment period provisions, separate fee and carry arrangements, and separate reporting obligations. This multiplicity of governance frameworks creates administrative burden for LPs — particularly large institutional investors that hold commitments across multiple vehicles — and reduces transparency.
At a meeting held on April 22, 2025, the LPAC voted to grant preliminary consent to the proposed reorganization, with 78% in interest voting in favor. The LPAC was advised by independent counsel, Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner), which conducted its own review of the reorganization framework and endorsed the consolidation on governance and efficiency grounds. The LPAC's preliminary consent is non-binding and is subject to final approval upon review of the PLR request and the definitive transaction documents, but it constitutes strong evidence of genuine investor demand for the reorganization.
III. Legal Framework
This section sets forth the legal framework for the three anti-abuse doctrines under which the IRS could potentially challenge the proposed reorganization. Each doctrine is discussed in turn.
A. The Substance-Over-Form Doctrine
General Principles. The substance-over-form doctrine is a longstanding judicial principle under which the IRS and the courts may disregard the legal form chosen by a taxpayer and instead recharacterize a transaction in accordance with its economic substance, where the form selected by the taxpayer lacks economic substance or fails to reflect the economic reality of the transaction. The doctrine is rooted in the principle, articulated by the Supreme Court in Gregory v. Helvering, 293 U.S. 465, 469 (1935), that a transaction must have a "business or corporate purpose" beyond the obtaining of a tax benefit, and that the tax law "deals with substance and realities" rather than merely with "forms and labels." The doctrine has been applied in a range contexts, including reorganizations, sales and exchanges, financing transactions, and partnership formations.
Leading Cases. The substance-over-form doctrine was first given definitive articulation by the Supreme Court in Gregory v. Helvering, 293 U.S. 465 (1935), where the Court held that a corporate reorganization that complied with the literal statutory requirements nevertheless could be disregarded for tax purposes because it was a "mere device" without business or corporate purpose. Justice Sutherland's opinion established the foundational principle that "the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended."
In Knetsch v. United States, 364 U.S. 361 (1960), the Supreme Court applied the substance-over-form doctrine to disregard a borrowing arrangement used to generate interest deductions, holding that the transaction lacked economic substance because the taxpayer had no genuine economic interest in the underlying property apart from the tax benefits.
In Frank Lyon Co. v. United States, 435 U.S. 561 (1978), the Supreme Court articulated the converse principle: where a transaction is imbued with genuine economic substance and the form chosen reflects a real economic transaction entered into by parties with adverse economic interests, the chosen form will be respected for tax purposes. The Frank Lyon decision is significant because it establishes that the substance-over-form doctrine does not permit the IRS to recharacterize transactions that have real economic substance merely because the form chosen also produces tax benefits.
Taken together, these cases establish a framework under which a transaction's form will be respected for tax purposes if and only if: (1) the chosen form has economic substance apart from its tax benefits; (2) the transaction meaningfully changes the taxpayer's economic position; and (3) the taxpayer has a genuine non-tax business purpose for entering into the transaction.
Codification Under IRC § 7701(o)
Effective for transactions entered into after March 30, 2010, IRC § 7701(o) codifies the economic substance doctrine. Under § 7701(o)(1), the economic substance doctrine is applied on a conjunctive two-prong basis: a transaction shall be treated as having economic substance only if —
(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and
(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.
Section 7701(o)(5)(A) defines the "economic substance doctrine" as the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. Section 7701(o)(2) provides that profit potential may be considered for purposes of prong (A), but only if the present value of the reasonably expected pre-tax profit is substantial in relation to the present value of the expected net tax benefits. Section 7701(o)(5)(C) clarifies that the determination of whether the economic substance doctrine is "relevant" to any transaction is made without regard to the statutory provision — in other words, the statute does not create a new requirement that every transaction must satisfy the economic substance doctrine, but codifies the doctrine where it is otherwise applicable.
The penalty consequences of failing the economic substance doctrine are severe: under IRC § 6662(b)(6), a strict-liability 20% accuracy-related penalty applies (increased to 40% under IRC § 6662(i) for nondisclosed transactions), without the possibility of a reasonable cause defense under § 6664(c)(2).
B. The Step Transaction Doctrine
General Principles. The step transaction doctrine is a judicial doctrine closely related to — and in some formulations a subset of — the substance-over-form doctrine. Under the step transaction doctrine, when a series of formally separate steps are in substance integrated elements of a single transaction, the IRS and the courts may collapse the separate steps and treat the overall transaction as a single event for tax purposes. The doctrine is premised on the principle that the tax consequences of a transaction should be determined by looking at the substance of what occurred overall, rather than by analyzing each formal step in isolation.
The step transaction doctrine is significant in the context of the Solara reorganization because the proposed reorganization involves five sequential steps occurring over a period of approximately ten weeks (September 15, 2025 through December 1, 2025). The key question is whether the IRS could collapse all five steps into a single integrated transaction and, if so, whether such collapsing would alter the tax consequences.
Three Judicial Tests
Courts have articulated three distinct tests for determining when the step transaction doctrine applies. These tests are not mutually exclusive; different courts and different circuits have applied different tests, and the IRS has at times argued for the application of whichever test is most favorable to its position. The three tests are:
(1) The End Result Test. Under the end result test, as applied in Penrod v. Commissioner and King Enterprises v. United States, 418 F.2d 511 (Ct. Cl. 1969), a series of formally separate steps will be collapsed into a single transaction if the steps were prearranged parts of a single transaction intended to reach a particular end result. This is the broadest of the three tests and is most readily satisfied by the IRS because it requires only a showing that the taxpayer had a single overall plan and intended from the outset to reach the ultimate end result. Under this test, the focus is on the taxpayer's subjective intent and the objective planning of the transaction.
(2) The Interdependence Test. Under the interdependence test, as applied in Redding v. Commissioner, 630 F.2d 1169 (7th Cir. 1980), the step transaction doctrine will apply only if the individual steps in the series are so interdependent that "the legal relations created by one transaction would have been fruitless without a completion of the series." This test is narrower than the end result test because it requires an inquiry into whether each step has independent significance — that is, whether any step standing alone would achieve a meaningful result for the parties, or whether the steps are so intertwined that no step has meaning absent the others.
(3) The Binding Commitment Test. Under the binding commitment test, as applied in Commissioner v. Gordon, 391 U.S. 83 (1968), the step transaction doctrine will apply only if, at the time the first step was entered into, there existed a binding commitment to undertake the later step or steps. This is the narrowest of the three tests because it requires the existence of an enforceable legal obligation, not merely a plan or intent, to complete the subsequent steps. Under this test, a taxpayer who retains discretion to complete or abandon later steps — even if the taxpayer intends to complete them — will not be subject to collapsing.
Application to the Solara Reorganization
The key question for purposes of the Solara reorganization is whether the IRS could invoke any of the three step transaction tests to collapse Steps 1 through 5 into a single integrated transaction. This question has two components: (a) the threshold question of whether the steps can be collapsed under any of the three tests, and (b) the consequential question of whether collapsing the steps would change the tax result. As discussed in Section V below, we conclude that even under the broadest test (the end result test), collapsing the steps would not alter the tax treatment because the collapsed transaction — a contribution of partnership property to a partnership followed by a distribution of partnership interests — would remain tax-free under IRC §§ 721(a) and 731(a).
C. The Partnership Anti-Abuse Rule — Treas. Reg. § 1.701-2
Treas. Reg. § 1.701-2(a) — Intent of Subchapter K
Treasury Regulations § 1.701-2(a) sets forth the underlying policy of Subchapter K, providing that:
Subchapter K is intended to permit taxpayers to conduct joint business (including investment) activities through a flexible economic arrangement without incurring an entity-level tax. Implicit in the intent of Subchapter K are the following requirements: (1) the partnership must be bona fide and each partnership transaction or series of related transactions (individually or collectively, the "transaction") must be entered into for a substantial business purpose; (2) the form of each partnership transaction must be respected under substance over form principles; and (3) the tax consequences under Subchapter K to each partner of partnership operations and of transactions between the partner and the partnership must accurately reflect the partners' economic agreement and clearly reflect the partners' income.
Treas. Reg. § 1.701-2(b) — General Anti-Abuse Rule
Treasury Regulations § 1.701-2(b) provides the operative anti-abuse rule:
If a partnership is formed or availed of in connection with a transaction a principal purpose of which is to reduce substantially the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent of Subchapter K, the Commissioner can recast the transaction for federal tax purposes as appropriate to achieve tax results that are consistent with the intent of Subchapter K, in light of the applicable statutory and regulatory provisions and the pertinent facts and circumstances.
The regulation provides the Commissioner with broad authority to recast transactions, including: (i) treating the partnership as an aggregate of its partners in whole or in part, (ii) treating one or more of the partners of the partnership as not a partner, (iii) adjusting the method of accounting used by the partnership or a partner, (iv) reallocating items of income, gain, loss, deduction, or credit among the partners, and (v) otherwise adjusting the claimed tax treatment.
Treas. Reg. § 1.701-2(c) — Factors Considered
Treasury Regulations § 1.701-2(c) provides that in determining whether the Partnership Anti-Abuse Rule applies, the Commissioner will consider all relevant facts and circumstances, including:
(1) whether the partnership was formed or availed of with a principal purpose of substantially reducing the present value of the partners' aggregate federal tax liability;
(2) the present value of the partners' aggregate federal tax liability if the purported partnership is respected, compared to what it would be in the absence of the partnership;
(3) whether the purported business purpose for a transaction is clearly outweighed by the tax-avoidance motive; and
(4) whether the result produced by the transaction is consistent with the intent of applicable provisions of Subchapter K (including, without limitation, §§ 704(b), 704(c), 721, 731, and 752) and the regulations thereunder.
Treas. Reg. § 1.701-2(d) — Abuse of Entity Treatment
Treasury Regulations § 1.701-2(d) addresses a specific category of abuse — the use of the partnership form to circumvent the intent of provisions of the Code that are not within Subchapter K but that are affected by the use of a partnership. Under § 1.701-2(d), if a partnership is formed or availed of in connection with a transaction a principal purpose of which is to reduce substantially the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent of an applicable provision of the Code (not limited to Subchapter K provisions), the Commissioner may treat the partnership as an aggregate of its partners, in whole or in part, as appropriate to carry out the intent of the applicable provision.
Application to Fund Reorganizations
The Partnership Anti-Abuse Rule has been applied sparingly in the context of legitimate fund restructurings. The regulation was promulgated in 1995 primarily in response to concerns about abusive partnership transactions — including transactions involving artificial basis inflation, loss trafficking, and abusive allocation arrangements — that exploited the flexibility of partnership taxation to produce results Congress did not intend. The regulation was not designed to second-guess bona fide business restructurings in which the partnership form is used for its intended purpose of facilitating joint business activities among partners in a tax-efficient manner.
The preamble to the final regulations noted that the anti-abuse rule is intended to be invoked only in situations where the use of the partnership form produces results that are clearly inconsistent with the intent of Subchapter K, and not in situations where the taxpayer has made legitimate use of the partnership provisions. As discussed in Section VI below, the Solara reorganization falls squarely within the latter category.
IV. Analysis: Substance-Over-Form Doctrine
A. Economic Substance of the Reorganization
The proposed reorganization fundamentally alters Solara's economic position by consolidating four separate legal entities — organized and operating across three different jurisdictions (the Cayman Islands, Luxembourg, and, following the reorganization, the United States) — into a single master fund structure with two feeder vehicles. This is not a cosmetic or circular restructuring in which the same assets are held by the same parties in essentially the same form. Rather, the reorganization effects a genuine transformation of the legal, regulatory, and operational architecture of Solara's fund platform, with tangible economic consequences that extend well beyond any tax effects.
The tangible economic consequences of the reorganization include the following:
Cost Savings. The consolidation of four separate offshore vehicles into the Master Fund and two feeders will eliminate approximately $3.8 million per year in duplicative offshore administration, audit, registered office, regulatory, and legal compliance costs. This figure has been documented in a detailed cost analysis prepared by Douglas Wexford (CFO) and Stefan Dalmqvist (Head of Tax) and reviewed by Caldwell Pierce & Co. LLP. The cost savings are recurring and substantial, representing a meaningful reduction in the overhead expense of the fund platform. Over a ten-year projected remaining fund life, the present value of these cost savings (Discounted at a 7% rate) exceeds $26 million.
Regulatory Compliance. The reorganization reduces Solara's exposure to the OECD Pillar Two GloBE rules, which become effective for the Luxembourg SCSp entities beginning with fiscal year 2025. Under the GloBE framework, the Luxembourg SCSps would be subject to a 15% global minimum effective tax rate, potentially increasing the effective tax rate on income recognized through the Luxembourg structures and thereby diminishing the tax and regulatory advantages that justified the establishment of those structures. By dissolving the Luxembourg SCSps and consolidating their assets into the Delaware-domiciled Master Fund, Solara eliminates the application of the GloBE rules to those entities entirely. This is a material change in Solara's regulatory and economic posture that would be valuable irrespective of any U.S. federal income tax consequences.
Operational Efficiency. The reorganization reduces the number of separate sets of financial statements, tax returns, Schedule K-1 packages, FATCA and CRS filings, and regulatory reports from six fund vehicles (four offshore, two domestic) to a streamlined master-feeder structure consisting of the Master Fund, two feeders, and two domestic co-investing funds. This simplification reduces the risk of reporting errors, decreases the burden on Solara's in-house finance and tax teams, and allows the redeployment of internal resources from compliance activities to value-generating investment activities.
Governance. The reorganization creates a single governance framework through the Consolidated Master Fund LP limited partnership agreement, replacing the current patchwork of six separate governing documents (two Delaware LPAs, two Cayman exempted limited partnership agreements, and two Luxembourg SCSp partnership agreements, each governed by different substantive law and containing different governance, fee, carry, and reporting provisions). This streamlined governance structure reduces the administrative burden on LPs — particularly large institutional investors holding commitments across multiple vehicles — and improves transparency and consistency in the application of fund terms.
These changes are meaningful economic alterations to Solara's position that exist entirely apart from any federal income tax effects. The reorganization would be economically justified even if it produced no tax benefits whatsoever.
B. Substantial Non-Tax Business Purpose
Four independent, substantial non-tax business purposes support the reorganization. Each is independently sufficient to satisfy the "substantial purpose" prong of the economic substance doctrine, and their collective weight makes the case overwhelming.
First: Operational Cost Reduction ($3.8 Million Annually). As documented in the cost analysis prepared by the Solara in-house team and reviewed by Caldwell Pierce & Co. LLP, the reorganization will eliminate approximately $3.8 million per year in duplicative offshore costs. These cost savings are distributed across multiple categories — fund administration (Clarendon Fund Services Ltd. fees), audit (Caldwell Pierce & Co. LLP fees for separate offshore vehicle audits), legal compliance (Meridian Offshore Legal and Veldhuis & Gérard S.à r.l. ongoing retainers for the Cayman and Luxembourg vehicles, respectively), registered office services (Harborstone Corporate Services Ltd.), and regulatory fees (CIMA and CSSF registration and reporting fees). The cost savings are not speculative or contingent; they are based on actual contractual obligations that will terminate upon dissolution of the legacy offshore vehicles.
Second: OECD Pillar Two GloBE Compliance. The forthcoming Pillar Two rules (effective for Solara's Luxembourg entities from FY 2025) impose a 15% global minimum effective tax rate on constituent entities of multinational enterprise groups meeting the revenue threshold. The Luxembourg SCSps were originally established to provide treaty access and regulatory advantages for non-U.S. investors, but the imposition of the GloBE top-up tax substantially diminishes these advantages. Continuing to maintain the Luxembourg structures in the face of the GloBE rules would be economically irrational — the structures would impose ongoing administrative and regulatory costs without delivering their intended benefits. The Pillar Two impact assessment, prepared by Stefan Dalmqvist and reviewed by Caldwell Pierce & Co. LLP, quantifies the expected top-up tax exposure and confirms that dissolution of the Luxembourg vehicles is warranted on purely economic grounds.
Third: FATCA/CRS Simplification. The reduction in the number of separate reporting entities subject to independent FATCA and CRS reporting obligations decreases compliance costs, reduces the risk of reporting errors and the associated penalty exposure, and simplifies the coordination among Solara's internal compliance function and its external service providers. The FATCA/CRS compliance burden has increased significantly in recent years as the number of participating jurisdictions has expanded and as the reporting requirements have become more detailed, making simplification of the reporting infrastructure increasingly valuable.
Fourth: LP-Requested Governance Simplification. The LPAC voted on April 22, 2025, with 78% in interest consenting, to support the proposed reorganization. This vote followed a presentation by the Solara team and a review by LPAC counsel, Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner), which independently evaluated the reorganization framework and endorsed it on governance and efficiency grounds. The LPAC vote reflects genuine investor demand — driven by the administrative burden of monitoring and governing multiple parallel fund vehicles — for a simplified structure. The independent endorsement by LPAC counsel, a law firm with no economic interest in the outcome, further corroborates the bona fide nature of the governance rationale.
C. Analysis Under IRC § 7701(o)
Applying the codified two-prong economic substance test of IRC § 7701(o) to the proposed reorganization:
Prong 1 — Meaningful Change in Economic Position. The reorganization materially changes Solara's economic position apart from federal income tax effects. The fund platform moves from six parallel vehicles organized across three jurisdictions to a streamlined master-feeder structure with two feeders and two co-investing domestic funds. Approximately $7.75 billion in portfolio assets are transferred and consolidated. Liabilities totaling $1.34 billion are reallocated from four separate offshore entities to a single domestic entity. Administrative costs decrease by approximately $3.8 million annually. The regulatory posture of the fund platform changes fundamentally with respect to the OECD Pillar Two GloBE rules, CIMA registration requirements, and CSSF reporting obligations. These are real, concrete changes in economic position that would be material to any reasonable investor or fund manager.
Prong 2 — Substantial Non-Tax Purpose. The four non-tax business purposes described above are each independently substantial. They are documented in contemporaneous business records, including the GP board resolution of March 14, 2025 (approving exploration of the reorganization), the LPAC presentation materials dated April 11, 2025, the cost analysis prepared by Douglas Wexford and Stefan Dalmqvist, the Pillar Two impact assessment, and the LPAC meeting minutes of April 22, 2025 (recording the 78% preliminary consent vote). The contemporaneous documentation of business purpose is an important factor in IRS and judicial analysis, and Solara's records are thorough and consistent.
Conclusion. The proposed reorganization satisfies both prongs of the economic substance doctrine under IRC § 7701(o). The IRS would not have a viable basis for challenging the transaction under the substance-over-form doctrine. The reorganization has genuine economic substance, changes Solara's economic position in meaningful ways apart from tax effects, and is motivated by four independently substantial non-tax business purposes.
V. Analysis: Step Transaction Doctrine
A. Application of the Three Tests
1. End Result Test
The five steps of the proposed reorganization are coherently planned and documented as a coordinated reorganization with a defined target end result: the consolidation of four offshore fund vehicles into the Consolidated Master Fund LP, with the establishment of two Cayman feeder partnerships for non-U.S. and U.S. tax-exempt investors, respectively. The GP board resolution of March 14, 2025 approved "exploration" of the reorganization as a unified restructuring program, and the LPAC presentation of April 11, 2025 described the reorganization as a coordinated multi-step process. There is no question that the steps were conceived as parts of an overall plan.
Under the end result test — the broadest of the three step transaction tests — the IRS could potentially argue that Steps 1 through 5 should be collapsed into a single integrated transaction on the theory that they were prearranged parts of a single plan intended to reach a predetermined end result. This is the test most likely to be invoked by the IRS, and the test most likely to result in collapsing.
However, even if the IRS were to successfully invoke the end result test and collapse all five steps into a single transaction, the tax result would not change. The collapsed transaction would still constitute: (a) the formation of new partnership entities (a non-taxable event), (b) the contribution of portfolio assets by four offshore partnerships to a domestic partnership (the Consolidated Master Fund LP) in exchange for partnership interests (tax-free under IRC § 721(a)), and (c) the distribution of those partnership interests to the limited partners of the offshore vehicles upon dissolution (tax-free under IRC § 731(a)). The intermediate steps do not create any tax benefit that would be lost or altered if the transaction were viewed as a single integrated event. There is no "whipsaw" effect and no inconsistency between the step-by-step tax treatment and the collapsed treatment.
Furthermore, each step involves different contributing entities (different offshore vehicles contributing on different dates — October 1, October 15, and November 1, 2025), different portfolios of assets, and different investor bases. The sequencing of the steps is not arbitrary or tax-motivated; rather, it reflects genuine operational, legal, and regulatory constraints. The Cayman vehicles require different dissolution procedures (coordinated with Meridian Offshore Legal and Fiona McAllister under Cayman Islands law) than the Luxembourg SCSps (coordinated with Veldhuis & Gérard S.à r.l. and Marc Gérard under Luxembourg law, and requiring CSSF notification and tax clearance). Fund IV and Fund V are different vintage funds with different partnership agreements, different LP bases, different deployment levels, and different credit facility arrangements. These real-world constraints dictate the sequencing, not tax avoidance.
2. Interdependence Test
Under the interdependence test, the key question is whether the individual steps in the reorganization are "so interdependent that the legal relations created by one transaction would have been fruitless without a completion of the series." We analyze each step below.
Step 1 (Formation of New Entities). The formation of the new entities — the Master Fund GP LLC, the Consolidated Master Fund LP, the International Feeder, and the Tax-Exempt Feeder — is a necessary predicate to the subsequent contribution steps. Without the new entities, there would be no recipient for the contributed assets. However, the formation step has independent administrative and legal significance: it involves filing certificates of formation and certificates of limited partnership with the Delaware Secretary of State, Cayman formations through Meridian Offshore Legal, the preparation and execution of governing documents (the Master Fund LPA, the GP LLC operating agreement, the feeder LP agreements), the establishment of capital account structures and partnership allocation provisions, the obtaining of EINs from the IRS, and the filing of Form 8832 elections. These are all significant legal and administrative events that exist independently of whether the subsequent steps are completed.
Steps 2 and 3 (Fund IV Offshore Contributions). Each of the Fund IV offshore contributions is operationally independent. Fund IV-A Cayman operates under Cayman Islands law, holds a distinct portfolio (including NovaBright Data Systems Inc. and Thorngate Fiber Networks LP), and serves a different investor base than Fund IV-B Lux, which operates under Luxembourg law and holds a different portfolio (including Crestline Cloud Solutions LLC). The contribution of Fund IV-A Cayman's assets does not depend on Fund IV-B Lux's contribution, and vice versa. Even if only one offshore vehicle were consolidated — for example, if the Luxembourg SCSps were dissolved in response to Pillar Two but the Cayman vehicles were retained — the reorganization would achieve cost savings and governance benefits for that vehicle alone. Neither step is "fruitless" without the other.
Step 4 (Fund V Offshore Contributions). Similarly, the Fund V offshore contributions are independent of the Fund IV contributions. Fund V-A Cayman and Fund V-B Lux are vehicles of a different vintage (2023 versus 2021), with a different deployment level (38% versus 72%), different LP commitments, different partnership agreements, and different credit facility arrangements (the Fund V subscription facility involves both Ashford National Bank, N.A. and Sentinel Capital Markets LLC as co-lender and administrative agent, whereas the Fund IV facility involves only Ashford National Bank). Either could be consolidated independently of the other, and either Fund V vehicle could be consolidated independently of the Fund IV vehicles.
Step 5 (Dissolution and LP Migration). The dissolution of each legacy vehicle is a consequence of its having contributed all of its assets to the Master Fund, but dissolution is a legally and economically distinct event from contribution. Under both Cayman Islands law and Luxembourg law, the dissolution of a partnership involves separate legal procedures — including filings with regulatory authorities (CIMA for Cayman vehicles; RCS and CSSF for Luxembourg vehicles), final audits, settlement of obligations, and distribution of remaining assets. The dissolution is not merely a

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

Record

Parties

Dates

Amounts