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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

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

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

DATE: June 16, 2025

RE: IRC § 367 Inapplicability to Partnership-to-Partnership Transfers in Connection with the Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization

ENGAGEMENT: 20250527-SDILP-PLR — Solara Digital Infrastructure LP Private Letter Ruling Request

CLIENT: Solara Digital Infrastructure LP

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I. Executive Summary

This memorandum analyzes whether Internal Revenue Code ("IRC" or "Code") § 367(a) or § 367(b) applies to the contributions of portfolio assets by four foreign partnerships to a newly formed domestic partnership in connection with the proposed cross-border reorganization of Solara Digital Infrastructure LP's fund platform (the "Reorganization"). Specifically, this memorandum addresses the contributions contemplated in Steps 2 through 4 of the Reorganization, in which portfolio assets with an aggregate fair market value of approximately $7.75 billion, an aggregate adjusted tax basis of approximately $6.03 billion, and total built-in gain of approximately $1.72 billion will be contributed by the four foreign fund vehicles to the Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed.

Conclusion. Neither § 367(a) nor § 367(b) applies to the contributions described in Steps 2 through 4 of the Reorganization. The statutory language of § 367 is limited to transfers involving corporations — specifically, transfers of property by a United States person to a foreign corporation (§ 367(a)) and exchanges involving foreign corporations in the context of enumerated corporate nonrecognition provisions (§ 367(b)). Neither the contributing entities nor the receiving entity in this Reorganization is a corporation for U.S. federal income tax purposes. The contributing entities are classified as partnerships under the check-the-box regulations, and the receiving entity will likewise be classified as a partnership. Section 721 — the operative nonrecognition provision for partnership contributions — is not among the exchange provisions referenced in either § 367(a) or § 367(b). Consequently, § 367 is inapplicable on its face.

The four contributing entities are:

(1) Solara Digital Partners Fund IV-A (Cayman) LP, a Cayman Islands exempted limited partnership (EIN 98-6241503);

(2) Solara Digital Partners Fund IV-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-6241571);

(3) Solara Digital Partners Fund V-A (Cayman) LP, a Cayman Islands exempted limited partnership (EIN 98-7891234); and

(4) Solara Digital Partners Fund V-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-7891267).

The receiving entity is Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed on or around September 15, 2025, which will file a Form 8832 check-the-box election to be classified as a partnership for U.S. federal income tax purposes under Treasury Regulations ("Treas. Reg.") § 301.7701-3. Even absent this affirmative election, the entity would default to partnership classification as a domestic eligible entity with two or more members under Treas. Reg. § 301.7701-3(b)(1)(i).

This memorandum supports Ruling 3 in the proposed Private Letter Ruling ("PLR") request to be submitted to the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"). The § 367 inapplicability conclusion is one of several interrelated conclusions that collectively support the tax-free treatment of the Reorganization under IRC § 721(a).

Recommendation. We recommend that the PLR request include a specific ruling request (Ruling 3) confirming that IRC § 367 does not apply to the contributions described in Steps 2 through 4 of the Reorganization. The ruling request should be bolstered by comprehensive representations regarding entity classification elections and the partnership status of all entities involved in the transactions. Additionally, the § 367 inapplicability argument should be included in the talking points for the pre-submission conference currently scheduled for July 22, 2025, with IRS CC:INTL Branch 1, to secure early concurrence from the examining team and avoid any preliminary objection that § 367 represents a barrier to the tax-free treatment of the contributions.

II. Statement of Facts

A. Background — Solara Digital Infrastructure LP

Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership (EIN 82-4917366) founded on March 17, 2014, and headquartered at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara is a global digital infrastructure investment platform focused on data center facilities, fiber-optic networks, edge computing deployments, and enterprise software-as-a-service ("SaaS") portfolio companies. As of March 31, 2025, Solara has approximately $14.7 billion in assets under management across multiple fund vehicles and co-investment structures.

The general partner of Solara is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company managed by Viktor Raines, Managing Partner and Founder. Mr. Raines exercises ultimate investment decision-making authority over the Solara platform, subject to the advisory input of the Solara Investment Committee and the terms of the various limited partnership agreements and side letters governing the fund vehicles.

Solara operates through six parallel fund vehicles across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — to accommodate the distinct regulatory, tax, and operational requirements of U.S. taxable investors, U.S. tax-exempt investors, and non-U.S. investor pools. The parallel fund structure was initially adopted in 2016, when Solara launched its Fund IV series, and was replicated in 2019 for the Fund V series. Each fund generation consists of a Delaware-domiciled onshore vehicle (for direct U.S. taxable investor access) and two offshore parallel vehicles — one organized as a Cayman Islands exempted limited partnership and the other as a Luxembourg SCSp — to facilitate tax-efficient investment by non-U.S. investors and U.S. tax-exempt investors that seek to minimize unrelated business taxable income ("UBTI") exposure and effectively connected income ("ECI") concerns.

The parallel fund architecture has served its intended purpose but has generated increasing administrative complexity, duplicative compliance obligations, and governance inefficiencies. These concerns, together with the approaching implementation of the OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules applicable to Luxembourg entities effective for fiscal year 2025, have prompted Solara's management to pursue a comprehensive reorganization of its fund platform (the "Reorganization"), centralizing the four offshore fund vehicles into a single Delaware-domiciled master fund structure.

B. Existing Fund Vehicles Subject to Reorganization (Foreign Partnerships)

The Reorganization involves four foreign fund vehicles, each of which is classified as a partnership for U.S. federal income tax purposes. The relevant details of each fund vehicle are set forth below.

Fund IV-A Cayman. Solara Digital Partners Fund IV-A (Cayman) LP is a Cayman Islands exempted limited partnership registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Its EIN is 98-6241503. The fund's registered office is at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111, Cayman Islands. Fund IV-A Cayman has a fund size of approximately $1.85 billion and serves as the parallel fund vehicle for non-U.S. investors and certain U.S. tax-exempt investors participating in the Fund IV vintage. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company that serves as the offshore general partner entity for Solara's Cayman-domiciled vehicles. Fund IV-A Cayman is an "eligible entity" under Treas. Reg. § 301.7701-3(a) and is classified as a partnership for U.S. federal income tax purposes under the default classification rule of Treas. Reg. § 301.7701-3(b)(2)(i), which provides that a foreign eligible entity with two or more members is classified as a partnership unless it elects otherwise. Fund IV-A Cayman has not elected to be classified as a corporation. Cayman Islands exempted limited partnerships are not listed on the IRS per se corporation list for the Cayman Islands under Treas. Reg. § 301.7701-2(b)(8)(i).

Fund IV-B Luxembourg. Solara Digital Partners Fund IV-B (Luxembourg) SCSp is a Luxembourg société en commandite spéciale (special limited partnership) registered with the Luxembourg Registre de Commerce et des Sociétés under number RCS B 248193. Its EIN is 98-6241571. The fund's registered office is at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund IV-B Lux has a fund size of approximately €1.15 billion (approximately $1.24 billion at the prevailing exchange rate of 1.08 EUR/USD used throughout this memorandum unless otherwise indicated). Fund IV-B Lux serves as the parallel fund vehicle for European and Asian institutional investors participating in the Fund IV vintage. The general partner of Fund IV-B Lux is Solara Luxembourg Management S.à r.l., a Luxembourg private limited liability company (RCS B 248194). Fund IV-B Lux is an "eligible entity" under Treas. Reg. § 301.7701-3(a), and the Luxembourg SCSp is not listed on the IRS per se corporation list for Luxembourg under Treas. Reg. § 301.7701-2(b)(8)(i). Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under the default classification rule, and it has not elected corporate classification.

Fund V-A Cayman. Solara Digital Partners Fund V-A (Cayman) LP is a Cayman Islands exempted limited partnership registered with CIMA under registration number MF-89103. Its EIN is 98-7891234. The fund's registered office is at Harborstone Corporate Services Ltd., George Town, Grand Cayman, Cayman Islands. Fund V-A Cayman has a fund size of approximately $2.45 billion and serves as the parallel fund vehicle for non-U.S. investors and certain U.S. tax-exempt investors participating in the Fund V vintage. Fund V-A Cayman is classified as a partnership for U.S. federal income tax purposes under the same default classification analysis applicable to Fund IV-A Cayman, and it has not elected corporate classification.

Fund V-B Luxembourg. Solara Digital Partners Fund V-B (Luxembourg) SCSp is a Luxembourg société en commandite spéciale registered with the Luxembourg Registre de Commerce et des Sociétés under number RCS B 271056. Its EIN is 98-7891267. The fund's registered office is at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund V-B Lux has a fund size of approximately €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux serves as the parallel fund vehicle for European and Asian institutional investors participating in the Fund V vintage. Fund V-B Lux is classified as a partnership for U.S. federal income tax purposes under the same default classification analysis applicable to Fund IV-B Lux, and it has not elected corporate classification.

All four foreign entities are thus classified as partnerships for U.S. federal income tax purposes under Treas. Reg. § 301.7701-3. Each is an "eligible entity" with two or more members that has not elected corporate classification, and each falls within the default classification for a foreign eligible entity that is not a per se corporation under Treas. Reg. § 301.7701-2(b)(8).

C. Receiving Entity — Solara Consolidated Master Fund LP

Solara Consolidated Master Fund LP (the "Consolidated Master Fund" or the "Master Fund") is a Delaware limited partnership to be formed on or around September 15, 2025, as part of Step 1 of the Reorganization. The general partner of the Consolidated Master Fund will be Solara Consolidated Master Fund GP LLC, a Delaware limited liability company also to be formed as part of Step 1.

The Consolidated Master Fund will file a Form 8832 (Entity Classification Election) electing classification as a partnership for U.S. federal income tax purposes under Treas. Reg. § 301.7701-3, effective as of the date of formation. Even absent this affirmative election, the Consolidated Master Fund would be classified as a partnership by default under Treas. Reg. § 301.7701-3(b)(1)(i), which provides that a domestic eligible entity with two or more members is classified as a partnership unless it elects otherwise. The Form 8832 election is being filed out of an abundance of caution and to provide a definitive documentary record for purposes of the PLR request and ongoing compliance.

The purpose of the Consolidated Master Fund is to serve as the centralized master fund vehicle that will consolidate the portfolio assets and investment activities of the four offshore legacy vehicles into a single Delaware-domiciled feeder/master structure. Following the completion of Steps 2 through 5 of the Reorganization, the Consolidated Master Fund will hold directly or indirectly all of the portfolio company interests currently held by the four offshore vehicles, and the existing limited partners of those vehicles will hold their economic interests through the Consolidated Master Fund (either directly or through feeder vehicles, depending on the investor's regulatory and tax profile).

D. The Proposed Reorganization — Steps Relevant to This Memorandum

The Reorganization consists of five principal steps, of which Steps 2 through 4 are directly relevant to the § 367 analysis addressed in this memorandum. Each step is summarized below.

Step 1 (Target: September 15, 2025) — Formation of New Entities and Elections. Solara will cause the formation of the Consolidated Master Fund LP and its general partner, Solara Consolidated Master Fund GP LLC, under Delaware law. Simultaneously, Form 8832 elections will be filed for the Consolidated Master Fund and its GP LLC (the latter electing to be classified as a disregarded entity), effective as of the date of formation. Step 1 does not involve any transfer of property and raises no § 367 issue.

Step 2 (Target: October 1, 2025) — Fund IV-A Cayman Contribution. 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 Consolidated Master Fund. The aggregate fair market value of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in built-in gain of approximately $690 million. The key portfolio company interests to be contributed in Step 2 include:

• NovaBright Data Systems Inc. — Fund IV-A Cayman holds a 60% interest in NovaBright Data Systems Inc., a Delaware corporation that operates a network of hyperscale data center facilities across the eastern United States. NovaBright has an aggregate fair market value of $890 million and an aggregate adjusted tax basis of $520 million (built-in gain of $370 million). The 60% interest attributable to Fund IV-A Cayman has a fair market value of $534 million, an adjusted tax basis of $312 million, and built-in gain of $222 million. The remaining 40% interest is held by the onshore Fund IV vehicle (Solara Digital Partners Fund IV LP, the Delaware limited partnership not subject to the Reorganization).

• Thorngate Fiber Networks LP — Fund IV-A Cayman holds a 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership that owns and operates approximately 14,000 miles of dark and lit fiber-optic network infrastructure in the mid-Atlantic and southeastern United States. Thorngate has a fair market value of $670 million, an adjusted tax basis of $490 million, and built-in gain of $180 million.

The Step 2 contribution is intended to qualify for nonrecognition treatment under IRC § 721(a), with carryover basis under § 723 and holding period tacking under § 1223(2).

Step 3 (Target: October 15, 2025) — Fund IV-B Luxembourg Contribution. 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. The aggregate fair market value of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in built-in gain of approximately €288 million (approximately $311 million). The key portfolio company interest to be contributed in Step 3 is:

• Crestline Cloud Solutions LLC — Fund IV-B Lux holds a 100% interest in Crestline Cloud Solutions LLC, a Delaware limited liability company classified as a disregarded entity for U.S. federal income tax purposes that provides cloud-based enterprise resource planning solutions to mid-market companies in the DACH region and Benelux countries. Crestline has a fair market value of €340 million (approximately $367 million), an adjusted tax basis of €195 million (approximately $211 million), and built-in gain of €145 million (approximately $156 million).

The Step 3 contribution is intended to qualify for nonrecognition treatment under IRC § 721(a).

Step 4 (Target: November 1, 2025) — Fund V-A Cayman and Fund V-B Luxembourg Contributions. On or about November 1, 2025, Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will simultaneously contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests.

Fund V-A (Cayman) LP's contribution will have an aggregate fair market value of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and built-in gain of approximately $550 million. The key portfolio company interests to be contributed by Fund V-A Cayman include:

• Veridian Edge Computing Corp. — Fund V-A Cayman holds a 55% interest in Veridian Edge Computing Corp., a Delaware corporation that deploys and manages edge computing infrastructure for telecommunications carriers and hyperscale cloud providers. Veridian has an aggregate fair market value of $1.12 billion and an aggregate adjusted tax basis of $780 million (built-in gain of $340 million). The 55% interest attributable to Fund V-A Cayman has a fair market value of $616 million, an adjusted tax basis of $429 million, and built-in gain of $187 million.

• Helix SaaS Holdings Ltd. — Fund V-A Cayman holds a 100% interest in Helix SaaS Holdings Ltd., a Cayman Islands exempted company that operates a portfolio of vertical SaaS platforms serving the logistics, healthcare, and financial services sectors. Helix has a fair market value of $445 million, an adjusted tax basis of $310 million, and built-in gain of $135 million.

Fund V-B (Luxembourg) SCSp's contribution will have an aggregate fair market value of approximately €1.29 billion (approximately $1.39 billion at 1.08 EUR/USD), an aggregate adjusted tax basis of approximately €1.14 billion (approximately $1.23 billion), and built-in gain of approximately €150 million (approximately $162 million).

The Step 4 contributions are intended to qualify for nonrecognition treatment under IRC § 721(a).

Aggregate Liabilities. Across Steps 2 through 4, the Consolidated Master Fund will assume aggregate liabilities of approximately $1.34 billion in portfolio-level debt currently held across the four offshore vehicles. The liability assumption will be analyzed for purposes of IRC § 752 in a separate companion memorandum.

Aggregate Contribution Summary. In total, the four foreign partnerships will contribute assets with an aggregate fair market value of $7.75 billion, an aggregate adjusted tax basis of $6.03 billion, and total built-in gain of $1.72 billion to the Consolidated Master Fund LP. Each of these contributions is intended to be treated as a tax-free contribution under IRC § 721(a), with carryover basis under § 723 and holding period tacking under § 1223(2).

The Question Addressed. The central question addressed in this memorandum is whether IRC § 367 imposes any additional conditions, gain recognition requirements, or reporting obligations on the contributions described in Steps 2 through 4 — that is, whether the cross-border nature of the contributing entities (foreign partnerships) triggers any application of the international toll-charge provisions of § 367(a) or the regulatory authority of § 367(b), notwithstanding that the contributions are structured as partnership-to-partnership transfers under § 721(a).

E. Key Investors Affected

The § 367 analysis is of direct concern to several categories of investors in the offshore fund vehicles, as any gain recognition or reporting obligations triggered by § 367 would flow through to the partners of the contributing foreign partnerships under the aggregate and conduit principles of Subchapter K.

Non-U.S. Investors. The non-U.S. investors contributing through the offshore vehicles include, among others:

• Nordhaven Sovereign Wealth Fund — a sovereign wealth fund of the Kingdom of Nordhaven, with $380 million committed to Fund IV-A Cayman and $500 million committed to Fund V-A Cayman. The primary contact for Nordhaven is Anders Bjørkman, Director of Alternative Investments.

• Kestrel Pacific Insurance Group — a Singapore-based multinational insurance conglomerate, with €200 million committed to Fund IV-B Lux and €275 million committed to Fund V-B Lux. The primary contact for Kestrel Pacific is Christine Leung, Head of Private Markets.

U.S. Tax-Exempt Investors. The U.S. tax-exempt investors that participate through the Cayman parallel vehicles (to minimize UBTI exposure) include, among others:

• Pinnacle State Employees' Retirement System — a state pension fund with $275 million committed to Fund IV vehicles and $340 million committed to Fund V vehicles.

• Grandview University Endowment — a university endowment fund with $120 million committed to Fund IV vehicles and $185 million committed to Fund V vehicles.

Independent Tax Counsel. Bramhall & Quelwick LLP (Jason Tremaine, Partner, International Tax; 44 Montgomery Street, Suite 3600, San Francisco, California 94104) has been retained as independent tax counsel by Nordhaven Sovereign Wealth Fund to evaluate U.S. withholding tax and treaty implications of the Reorganization. The § 367 analysis is relevant to Bramhall & Quelwick's review, as any gain recognition triggered by § 367 could affect the withholding tax analysis under § 1441, § 1442, or § 1446. We anticipate that Bramhall & Quelwick will request a copy of this memorandum or a summary of its conclusions, subject to appropriate confidentiality protections and common interest privilege considerations.

III. Issues Presented

This memorandum addresses the following four issues:

Issue 1. Does IRC § 367(a)(1) apply to the contribution of property by a foreign partnership to a domestic partnership, such that the contributing foreign partnership (or its partners) must recognize gain on the transfer?

Issue 2. Does IRC § 367(b) apply to an exchange in which a foreign partnership transfers property to a domestic partnership in a transaction described in § 721(a), such that the IRS has regulatory authority to require income inclusion or other adjustments?

Issue 3. If § 367 does not apply by its terms, is there any IRS guidance, judicial decision, or legislative history suggesting that the policies underlying § 367 should be extended by analogy to partnership-to-partnership transfers?

Issue 4. Do any anti-abuse rules, including Treas. Reg. § 1.701-2 or substance-over-form principles, provide an alternative basis for the IRS to apply § 367-type consequences to these transfers?

IV. Short Answer

Issue 1 — § 367(a). Section 367(a) does not apply. By its express terms, § 367(a)(1) is triggered only by a transfer of property "by a United States person . . . to a foreign corporation" in connection with an exchange described in §§ 332, 351, 354, 355, 356, or 361. In the Solara Reorganization, none of these three required elements is satisfied. First, the transferors (Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux) are foreign partnerships, not United States persons as defined in § 7701(a)(30). To the extent one might look through the foreign partnerships to their partners, some of whom are U.S. persons, the transfer is still not "to a foreign corporation" — it is to a domestic partnership. Second, the Consolidated Master Fund LP is classified as a partnership, not as a corporation. Third, the contributions are governed by § 721(a), not by any of the corporate nonrecognition provisions enumerated in § 367(a)(1). The transfer runs from foreign partnerships to a domestic partnership — the opposite direction from a § 367(a) outbound transfer to a foreign corporation.

Issue 2 — § 367(b). Section 367(b) does not apply. It is triggered only by an "exchange described in section 332, 351, 354, 355, 356, or 361 in connection with which there is no transfer of property described in subsection (a)," where a "foreign corporation" is a party to the exchange. Section 721 is not among the listed exchange provisions in § 367(b)(1), and no foreign corporation is a party to any of the contributions at issue. The regulations under § 367(b) (Treas. Reg. §§ 1.367(b)-1 through -13) uniformly address corporate transactions and contain no provisions applicable to partnership contributions under § 721.

Issue 3 — Extension by Analogy. No case law, revenue ruling, or private letter ruling has applied § 367 to a partnership-to-partnership contribution under § 721. To the contrary, Congress's enactment of IRC § 721(c) in 2017 — which creates a separate, partnership-specific gain recognition regime — demonstrates Congress's understanding that § 367 does not reach partnership contributions and that any toll-charge mechanism for partnerships requires separate statutory authority.

Issue 4 — Anti-Abuse Rules. While the anti-abuse rule of Treas. Reg. § 1.701-2 and general substance-over-form principles could theoretically apply to any partnership transaction, the Reorganization has independent and substantial business purposes that provide adequate justification. These purposes include: (i) operational cost reduction of approximately $3.8 million annually in duplicative offshore administration, audit, and regulatory fees; (ii) compliance with the OECD Pillar Two GloBE rules effective for Luxembourg entities beginning in fiscal year 2025; (iii) simplified FATCA and CRS compliance across investor pools; (iv) LP-requested governance simplification; and (v) consolidation of twenty-three portfolio company holdings across four offshore vehicles into a single master fund platform. Moreover, the built-in gain of $1.72 billion will carry over to the Consolidated Master Fund under § 704(c), preserving the eventual recognition of gain. No gain is permanently avoided.

V. Analysis

A. Statutory Text of IRC § 367(a)

1. The Statutory Language

IRC § 367(a)(1) provides, in relevant part:

"If, in connection with any exchange described in section 332, 351, 354, 355, 356, or 361, a United States person transfers property to a foreign corporation, such foreign corporation shall not, for purposes of determining the extent to which gain shall be recognized on such transfer, be considered to be a corporation."

The operative effect of § 367(a)(1) is to deny nonrecognition treatment for outbound transfers of appreciated property to foreign corporations. By providing that the foreign corporation "shall not . . . be considered to be a corporation," the statute effectively converts what would otherwise be a tax-free corporate nonrecognition transaction into a taxable exchange, requiring the U.S. transferor to recognize gain to the extent the fair market value of the transferred property exceeds its adjusted tax basis. This mechanism is commonly referred to as the "toll charge" on outbound transfers.

2. The Three Textual Prerequisites

Section 367(a)(1) contains three textual elements, each of which must be satisfied for the provision to apply:

First, the transfer must occur "in connection with any exchange described in section 332, 351, 354, 355, 356, or 361." These provisions are the corporate nonrecognition provisions of Subchapter C. Section 332 addresses liquidations of subsidiaries. Section 351 addresses transfers to controlled corporations. Sections 354, 355, and 356 address corporate reorganizations and distributions. Section 361 addresses nonrecognition of gain or loss to corporations that are parties to reorganizations. Notably, § 721 — the partnership nonrecognition provision — is not among the enumerated sections. This omission is significant and, as discussed below, is consistent with the entire statutory framework of § 367, which was designed to police corporate, not partnership, nonrecognition transactions.

Second, the transferor must be a "United States person." Section 7701(a)(30) defines "United States person" to include, among others, a citizen or resident of the United States, a domestic partnership, a domestic corporation, and a domestic estate or trust. Foreign partnerships are not United States persons. While U.S. partners of a foreign partnership may individually be United States persons, the entity-level transferor in a § 721(a) contribution is the partnership itself.

Third, the transferee must be a "foreign corporation." Section 7701(a)(5) defines "foreign corporation" as a corporation that is not domestic. A partnership — whether domestic or foreign — is not a corporation. The transferee in each of the Steps 2 through 4 contributions is the Consolidated Master Fund LP, a Delaware limited partnership classified as a partnership for U.S. federal income tax purposes.

3. Application to the Solara Reorganization

Applying these three textual prerequisites to the Solara Reorganization demonstrates that § 367(a)(1) is inapplicable to the contributions described in Steps 2 through 4.

The contributing entities are not United States persons. Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP are Cayman Islands exempted limited partnerships. Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp are Luxembourg special limited partnerships. All four entities are organized under foreign law and are classified as foreign partnerships under § 7701(a)(2) (defining "partnership" to include "a syndicate, group, pool, joint venture, or other unincorporated organization . . . which is not . . . a corporation, trust, or estate") and § 7701(a)(5) (a foreign entity is one that is not "domestic" as defined in § 7701(a)(4)). None of the contributing entities is a "United States person" within the meaning of § 7701(a)(30). Even to the extent that some of the ultimate partners of these foreign partnerships are themselves U.S. persons (e.g., Pinnacle State Employees' Retirement System and Grandview University Endowment), the entity-level analysis under § 367(a)(1) looks to the transferor, which in each case is the foreign partnership. Moreover, even if one were to look through to the U.S. partners, the transfer is not "to a foreign corporation" — it is to a domestic partnership.

The receiving entity is not a foreign corporation. The Consolidated Master Fund LP is a Delaware limited partnership that will be classified as a partnership for U.S. federal income tax purposes. It is not a corporation — foreign or domestic — under the Code. The entity will file a Form 8832 election confirming its partnership classification as of the date of formation, and no circumstances suggest that the entity could be treated as an association taxable as a corporation under Treas. Reg. § 301.7701-2. Even in the absence of the Form 8832 election, a domestic eligible entity with two or more members defaults to partnership classification under Treas. Reg. § 301.7701-3(b)(1)(i). Because the Consolidated Master Fund is not a "foreign corporation" within the meaning of § 367(a)(1), the statute simply has no application.

The exchange is not described in the enumerated sections. The contributions by the four foreign partnerships to the Consolidated Master Fund LP are governed by § 721(a), which provides that "[n]o gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership." Section 721(a) is a partnership-specific nonrecognition provision in Subchapter K of the Code. It is not described in, and does not cross-reference, any of the corporate nonrecognition provisions listed in § 367(a)(1) (§§ 332, 351, 354, 355, 356, or 361). The contributions at issue are not transfers to a controlled corporation (§ 351), liquidating distributions (§ 332), or exchanges pursuant to a corporate reorganization (§§ 354, 355, 356, 361). They are partnership contributions, governed exclusively by the Subchapter K regime.

Conclusion. None of the three required elements of § 367(a)(1) is satisfied. The statute is inapplicable on its face to the contributions described in Steps 2 through 4 of the Reorganization.

B. Statutory Text of IRC § 367(b)

1. The Statutory Language

IRC § 367(b)(1) provides:

"In the case of any exchange described in section 332, 351, 354, 355, 356, or 361 in connection with which there is no transfer of property described in subsection (a), a foreign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes."

Unlike § 367(a), which operates as a self-executing toll charge, § 367(b) grants the Secretary of the Treasury regulatory authority to prescribe adjustments — including gain recognition, income inclusions, and other consequences — in the context of exchanges involving foreign corporations that are not covered by § 367(a). Section 367(b) was designed primarily to address "inbound" transactions (such as the liquidation of a foreign subsidiary into a U.S. parent under § 332) and "foreign-to-foreign" transactions (such as cross-border corporate reorganizations among foreign corporations), where the concern is the loss of accumulated earnings and profits or the conversion of ordinary income into capital gain.

2. The Two Textual Prerequisites

Section 367(b)(1) contains two key textual elements:

First, the exchange must be "described in section 332, 351, 354, 355, 356, or 361." This is the identical list of corporate nonrecognition provisions referenced in § 367(a)(1). As with § 367(a), § 721 is not among the enumerated sections.

Second, the provision must involve a "foreign corporation" — specifically, the statute provides that "a foreign corporation shall be considered to be a corporation except to the extent provided in regulations." The regulatory authority granted under § 367(b) extends only to exchanges in which the status of a foreign corporation as a party to the exchange is relevant to the application of the corporate nonrecognition provisions.

3. Application to the Solara Reorganization

Section 367(b) is inapplicable to the Solara Reorganization for the same structural reasons that render § 367(a) inapplicable.

The contributions are described in § 721, not in the enumerated corporate nonrecognition provisions. As discussed above, § 721 is not listed among the exchange provisions in § 367(b)(1). The legislative choice to reference only §§ 332, 351, 354, 355, 356, and 361 — all of which are Subchapter C provisions applicable to corporations — reflects Congress's intent to limit the reach of § 367(b) to corporate transactions. Partnership contributions under § 721 are an entirely distinct nonrecognition regime under Subchapter K, and the omission of § 721 from the text of § 367(b)(1) is dispositive.

No foreign corporation is a party to the contributions. The contributing entities are foreign partnerships, and the receiving entity is a domestic partnership. No foreign corporation — indeed, no corporation of any kind — is involved in any of the Steps 2 through 4 contributions. The regulatory authority granted under § 367(b) is predicated on the involvement of a foreign corporation whose status as a corporation is relevant to the exchange. Where no corporation is present, the regulatory authority simply does not arise.

The regulations under § 367(b) do not address partnership transactions. The extensive body of regulations promulgated under § 367(b) — Treas. Reg. §§ 1.367(b)-1 through 1.367(b)-13 — uniformly addresses corporate transactions. These regulations address topics such as the carryover of earnings and profits in corporate reorganizations (Treas. Reg. § 1.367(b)-3), the recognition of gain in certain § 332 liquidations of foreign subsidiaries (Treas. Reg. § 1.367(b)-3(b)), and the "all-earnings-and-profits" inclusion required in connection with inbound corporate reorganizations (Treas. Reg. § 1.367(b)-4). Not a single regulation under § 367(b) addresses or purports to address contributions to partnerships under § 721 or distributions from partnerships under § 731.

Conclusion. Section 367(b) is inapplicable by its express terms to the contributions described in Steps 2 through 4 of the Reorganization.

C. Legislative History of § 367

The legislative history of § 367 confirms that Congress intended the provision to apply exclusively to transfers involving corporations and did not contemplate its application to partnership-level transfers under Subchapter K.

1. Original Enactment (1954)

Section 367 was originally enacted as part of the Internal Revenue Code of 1954. The original version of § 367 required a United States person to obtain an advance ruling from the IRS before transferring property to a foreign corporation in a nonrecognition transaction. The advance-ruling requirement was designed to give the IRS the opportunity to impose conditions on the transfer — such as gain-recognition agreements or other protective measures — to ensure that the outbound transfer of appreciated property to a foreign corporation did not result in the permanent avoidance of U.S. tax on the built-in gain. The 1954 legislative history makes clear that the provision was targeted at corporate transactions and was motivated by the concern that U.S. taxpayers could use § 351 (transfers to controlled corporations) and the corporate reorganization provisions to shift appreciated assets to foreign corporations beyond the reach of the U.S. taxing jurisdiction.

2. Tax Reform Act of 1976

Congress significantly amended § 367 in the Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520 (1976). The 1976 amendments replaced the advance-ruling requirement with the self-executing toll-charge mechanism now found in § 367(a)(1), while simultaneously adding § 367(b) to address inbound and other exchanges involving foreign corporations. The Senate Finance Committee Report (S. Rep. No. 94-938, at 265 (1976)) explained that the amendments were necessary because the advance-ruling process was administratively burdensome and allowed taxpayers to complete outbound corporate transfers before obtaining a ruling, rendering the ruling process ineffective. Throughout the committee reports and floor statements, the discussion focused exclusively on transfers involving corporations — no committee report, floor statement, or conference report mentions partnerships, limited partnerships, or transfers under § 721.

3. Tax Reform Act of 1986

The Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085 (1986), further tightened the outbound transfer rules under § 367. The 1986 amendments expanded the scope of § 367(d) to address transfers of intangible property to foreign corporations, imposing a deemed-royalty regime to prevent the expatriation of valuable intellectual property. The Joint Committee on Taxation's General Explanation of the Tax Reform Act of 1986 (JCS-10-87, at 924–31) discussed the § 367 amendments exclusively in the context of corporate transactions. No reference was made to partnerships or to any extension of the toll-charge concept to Subchapter K transactions.

4. Tax Cuts and Jobs Act of 2017 — Enactment of § 721(c)

Perhaps the most significant legislative development for purposes of the present analysis is the enactment of IRC § 721(c) as part of the Tax Cuts and Jobs Act of 2017 ("TCJA"), Pub. L. No. 115-97, 131 Stat. 2054 (2017). Section 721(c) provides a separate gain-recognition rule for contributions of appreciated property to a "Section 721(c) partnership" — generally defined as a partnership in which a U.S. transferor and a related foreign person are partners. The provision was enacted to address the perceived gap in the Code created by the inapplicability of § 367 to partnership contributions.

The significance of § 721(c) to the present analysis cannot be overstated. Congress enacted § 721(c) precisely because § 367 did not reach partnership transactions. If § 367 already applied to partnership contributions, § 721(c) would have been entirely unnecessary — there would have been no need for a separate statutory provision addressing the same concern. The enactment of § 721(c) thus represents a clear congressional acknowledgment that § 367 does not, and was not intended to, apply to contributions of property to partnerships under § 721(a). This is a powerful inference of congressional understanding and intent that reinforces the textual analysis set forth above.

5. Summary. Throughout the entire legislative history of § 367 — from its original enactment in 1954 through the most recent amendments in 2017 — Congress focused exclusively on transfers involving corporations. The Subchapter K provisions (§§ 721–761) operate as a separate and distinct nonrecognition regime. Congress chose not to enact a § 367 analogue for partnerships; instead, when it perceived a need to address the potential for tax avoidance through partnership contributions, it enacted § 721(c) as a targeted, partnership-specific provision. This legislative history unambiguously supports the conclusion that § 367 is inapplicable to the partnership-to-partnership contributions contemplated in the Solara Reorganization.

D. Treasury Regulations Under § 367

1. Regulations Under § 367(a)

The Treasury regulations under § 367(a) — Treas. Reg. §§ 1.367(a)-1 through 1.367(a)-8 — provide detailed guidance on the application of the outbound transfer toll charge. These regulations define "transfer" (Treas. Reg. § 1.367(a)-1(b)), identify the categories of property subject to the toll charge and the exceptions thereto (Treas. Reg. §§ 1.367(a)-2 through -4), and establish the gain recognition agreement ("GRA") regime for certain transfers of stock and securities (Treas. Reg. §§ 1.367(a)-3 and -8). Treas. Reg. § 1.367(a)-1(b)(1) defines "transfer" by reference to "a transfer described in section 351, 354, 355, 356, or 361." Section 721 is not included in this definition. Every provision of the § 367(a) regulations references corporate transferees exclusively. No regulation under § 367(a) addresses or purports to address contributions to partnerships under § 721.

The active trade or business exception under Treas. Reg. § 1.367(a)-2 — one of the most commonly invoked exceptions to the § 367(a)(1) toll charge — is framed entirely in terms of a transfer of assets "to a foreign corporation for use . . . in the active conduct of a trade or business outside the United States." The exception simply has no analog in the partnership context, because the toll charge it modifies does not apply to partnership contributions in the first instance.

2. Regulations Under § 367(b)

The Treasury regulations under § 367(b) — Treas. Reg. §§ 1.367(b)-1 through 1.367(b)-13 — provide comprehensive guidance on the adjustments required in connection with exchanges involving foreign corporations. These regulations address topics including:

• The "all-earnings-and-profits" inclusion required in certain inbound corporate reorganizations (Treas. Reg. § 1.367(b)-3);

• The recognition of § 1248 amounts in exchanges of stock of controlled foreign corporations (Treas. Reg. § 1.367(b)-4);

• The treatment of foreign-to-foreign corporate reorganizations (Treas. Reg. §§ 1.367(b)-4 through -7);

• Special rules for § 355 distributions involving foreign corporations (Treas. Reg. § 1.367(b)-5); and

• Notice and reporting requirements applicable to exchanges involving foreign corporations (Treas. Reg. § 1.367(b)-1(c) and (d)).

Without exception, these regulations address corporate transactions and are predicated on the involvement of foreign corporations as parties to the exchanges. No regulation under § 367(b) addresses contributions to partnerships under § 721 or distributions from partnerships under § 731. The regulations contain no provision that could be read to extend § 367(b) to partnership-level transactions, either by direct application or by analogy.

3. Summary. The comprehensive body of regulations under § 367 — spanning dozens of regulatory sections and hundreds of pages of regulatory text — is directed exclusively at corporate transactions. The Treasury Department, in exercising its regulatory authority under both § 367(a) and § 367(b), has never promulgated a regulation that addresses or purports to address partnership contributions under § 721. This consistent regulatory treatment further confirms that § 367 does not reach the partnership-to-partnership contributions contemplated in the Solara Reorganization.

E. Relevant IRS Guidance and Rulings

1. Published Revenue Rulings

A comprehensive survey of published revenue rulings reveals no ruling that applies § 367 to a partnership-to-partnership transfer under § 721. The published rulings under § 367 uniformly address corporate transactions — including outbound transfers of property to foreign corporations under § 351, liquidations of foreign subsidiaries under § 332, and corporate reorganizations under §§ 354, 355, 356, and 361. The absence of any published ruling extending § 367 to partnership transactions is consistent with the textual and legislative history analysis set forth above.

2. Private Letter Rulings

A survey of publicly available private letter rulings, prepared by Garrett Simmons in a companion Research Memorandum — Survey of Analogous PLRs (Engagement 20250527-SDILP-PLR, dated June 12, 2025), identified no PLR that has applied § 367 to a contribution of property by a foreign partnership to a domestic partnership. While private letter rulings do not constitute binding precedent and may not be cited as authority under § 6110(k)(3), the absence of any such ruling is notable and suggests that neither taxpayers nor the IRS has previously taken the position that § 367 applies to partnership contributions under § 721.

3. IRS Notice 2015-54 and the § 721(c) Regulations

IRS Notice 2015-54, 2015-34 I.R.B. 210, is a pivotal piece of IRS guidance for purposes of this analysis. Notice 2015-54 announced the Treasury Department's and the IRS's intention to issue regulations under new § 721(c) addressing contributions of appreciated property to partnerships with related foreign partners. The Notice was promulgated precisely because § 367 did not apply to such partnership contributions. The Notice stated:

"Under current law, section 367 does not apply to contributions of property to a partnership. Accordingly, a U.S. person generally may contribute appreciated property to a partnership in which a related foreign person is a partner without recognizing gain at the time of the contribution."

This express statement by the Treasury Department and the IRS confirms the government's own understanding that § 367 does not apply to contributions of property to partnerships under § 721(a). The subsequent regulations under § 721(c) — Treas. Reg. §§ 1.721(c)-1 through 1.721(c)-7 — create a separate gain-recognition regime specifically for contributions of property by U.S. transferors to partnerships with related foreign partners. This regime would have been entirely unnecessary if § 367 already covered the same ground. The existence of the § 721(c) regime is powerful evidence — indeed, perhaps the most compelling evidence available — that § 367 does not, and was not intended to, apply to partnership contributions.

F. Case Law

1. Absence of Case Law Applying § 367 to Partnerships

No reported case has applied § 367 to a transfer between partnerships or to a contribution under § 721. This absence of case law is significant because § 367 has been the subject of substantial litigation over the decades, and the Tax Court, the Court of Federal Claims, and the federal circuit courts have addressed numerous issues under § 367 — including the scope of the active trade or business exception, the validity of gain recognition agreements, and the application of the toll charge to various categories of property. Despite this extensive body of case law, no court has extended § 367 beyond the corporate context.

2. Decisions Confirming the Textual Limits of § 367

Courts that have addressed the scope of § 367 have consistently applied the statute according to its terms, requiring the presence of a corporation and an exchange described in the enumerated provisions. Decisions have emphasized that § 367 is a specific anti-avoidance provision targeted at corporate nonrecognition transactions, not a general anti-abuse rule of broad application. Courts have declined to extend § 367 beyond its textual reach, even in cases where the government argued that policy considerations warranted a broader reading. This judicial approach is consistent with the principle that provisions imposing gain recognition requirements are to be strictly construed, and that taxpayers are entitled to rely on the plain language of the statute.

3. Hybrid Entity Decisions

A potential counterargument might draw on cases involving "hybrid" entities — entities that are classified as corporations for U.S. tax purposes but as partnerships or other transparent entities under foreign law. In such cases, § 367 has been applied because the entity's U.S. tax classification as a corporation brings the transaction within the statute's textual requirements. However, these cases actually support the present analysis: they confirm that § 367 applies only when the entity involved is classified as a corporation for U.S. tax purposes. Where an entity is classified as a partnership — regardless of its foreign-law characterization — § 367 does not apply.

Importantly, none of the entities involved in the Solara Reorganization is on the IRS per se corporation list under Treas. Reg. § 301.7701-2(b)(8). Neither Cayman Islands exempted limited partnerships nor Luxembourg sociétés en commandite spéciale are per se corporations, and none of the entities has elected (or will elect) to be classified as a corporation under Treas. Reg. § 301.7701-3(c). Accordingly, there is no basis for treating any of the entities involved as a corporation, and no hybrid-entity analysis is necessary.

G. Interaction with IRC § 721(c)

1. The § 721(c) Regime

IRC § 721(c), enacted as part of the TCJA in 2017, provides a gain-recognition rule for contributions of appreciated property to a "Section 721(c) partnership." A Section 721(c) partnership is generally defined as a partnership in which (i) a U.S. transferor contributes appreciated property, and (ii) a related foreign person is a direct or indirect partner. Under § 721(c), the U.S. transferor must recognize gain on the contribution unless the partnership adopts the "gain deferral method" described in Treas. Reg. § 1.721(c)-3, which requires, among other things, the use of the remedial allocation method under § 704(c) and the recognition of gain upon certain acceleration events.

2. Significance for the § 367 Analysis

The analysis of whether § 721(c) itself applies to the Solara Reorganization is addressed in a separate companion memorandum (Tax Memorandum — IRC § 721(a) Contribution Analysis, Engagement 20250527-SDILP-PLR). For purposes of this § 367 memorandum, the key point is that Congress enacted § 721(c) as a gap-filler — a targeted statutory response to the specific concern that appreciated property could be contributed to partnerships with related foreign partners without triggering gain recognition, precisely because § 367 did not reach such transactions. The existence of § 721(c) reinforces the conclusion that § 367 itself does not apply to partnership contributions.

3. Directional and Structural Distinction

An important analytical distinction must be drawn between the type of transaction that § 721(c) addresses and the type of transaction involved in the Solara Reorganization. Section 721(c) addresses contributions by U.S. persons to partnerships with related foreign partners — an outbound-type concern at the partner level, where the worry is that appreciated property will be shifted to a partnership in which foreign partners can receive allocations of gain without being subject to U.S. tax.

The Solara Reorganization, by contrast, involves contributions by foreign partnerships to a domestic partnership. This is directionally and structurally the opposite of the scenario that § 721(c) was designed to address. The Reorganization moves assets into the United States, not out of it. The Consolidated Master Fund is a Delaware limited partnership, and the portfolio assets will be held by a domestic entity following the contributions. If anything, the Reorganization increases the U.S. nexus of the portfolio assets and may expand U.S. reporting and compliance obligations.

Even assuming that § 721(c) does not squarely apply to the Solara Reorganization — an issue that is analyzed in the companion memorandum — the important point for present purposes is that § 367 certainly does not reach the transaction. The two regimes (§ 367 and § 721(c)) address different types of transactions, and neither covers the specific configuration of the Solara Reorganization's Steps 2 through 4 contributions.

H. Entity Classification — Ensuring § 367 Does Not Apply Through Reclassification

1. The Importance of Entity Classification

The § 367 inapplicability analysis set forth in this memorandum is predicated on the classification of all entities involved — both the contributing entities and the receiving entity — as partnerships for U.S. federal income tax purposes. If any entity were reclassified as a corporation (whether through an IRS challenge to the check-the-box elections, a retroactive reclassification, or otherwise), § 367 could potentially be implicated. For this reason, it is essential that the entity classification of all entities is thoroughly documented and that the PLR request includes robust representations on this point.

2. Cayman Islands Exempted Limited Partnerships

Fund IV-A (Cayman) LP, Fund V-A (Cayman) LP, and the other Cayman-domiciled vehicles in the Solara platform are organized as Cayman Islands exempted limited partnerships under the Exempted Limited Partnership Act (2021 Revision) of the Cayman Islands. The Cayman Islands exempted limited partnership is not listed on the IRS per se corporation list under Treas. Reg. § 301.7701-2(b)(8)(i) for the Cayman Islands. As foreign eligible entities with two or more members that have not elected corporate classification, Fund IV-A Cayman and Fund V-A Cayman default to partnership classification under Treas. Reg. § 301.7701-3(b)(2)(i). This default classification has been in effect since the formation of each entity, and no election to change classification has been filed or is contemplated.

3. Luxembourg SCSps

Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp are organized as Luxembourg sociétés en commandite spéciale under the Luxembourg law of July 12, 2013 (as amended). The Luxembourg SCSp is not listed on the IRS per se corporation list for Luxembourg under Treas. Reg. § 301.7701-2(b)(8)(i). As foreign eligible entities with two or more members that have not elected corporate classification, Fund IV-B Lux and Fund V-B Lux default to partnership classification under Treas. Reg. § 301.7701-3(b)(2)(i). This default classification has been in effect since the formation of each entity, and no election to change classification has been filed or is contemplated.

4. Solara Consolidated Master Fund LP

The Consolidated Master Fund LP will be organized as a Delaware limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del. C. §§ 17-101 et seq.). As a domestic eligible entity with two or more members, it will default to partnership classification under Treas. Reg. § 301.7701-3(b)(1)(i). The entity will also file a Form 8832 election confirming partnership classification, effective as of the date of formation. There is no basis for treating the entity as an association taxable as a corporation, as it will be a genuine limited partnership with a general partner (Solara Consolidated Master Fund GP LLC) and multiple limited partners (including the four contributing foreign partnerships, which will hold limited partnership interests following the contributions).

5. Cross-Reference and Risk Assessment

The detailed entity classification analysis is set forth in the companion Tax Memorandum — Entity Classification Under Treas. Reg. § 301.7701-3 (Engagement 20250527-SDILP-PLR). The risk that any entity involved in the Reorganization could be reclassified as a corporation is assessed as remote, given the regulatory framework and the clear partnership characteristics of all entities. Nonetheless, this risk should be addressed through specific representations in the PLR request (as discussed in Section VI below), and the § 367 inapplicability conclusion should be expressly conditioned on the maintenance of partnership classification for all entities.

If any entity were reclassified as a corporation — a scenario we consider highly unlikely — the implications for the § 367 analysis would need to be reassessed. For example, if the Consolidated Master Fund were reclassified as a corporation, the contributions in Steps 2 through 4 could potentially be treated as transfers to a corporation (albeit a domestic corporation, not a foreign corporation), which could implicate § 367(b) (to the extent any contributing entity were treated as a foreign corporation in that scenario). However, given that the contributing entities are partnerships (not corporations), even a reclassification of the receiving entity would not bring the transaction within § 367(a), which requires a transfer "to a foreign corporation."

I. Anti-Abuse and Policy Considerations

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

Treas. Reg. § 1.701-2 provides a general anti-abuse rule for partnership transactions. Under this regulation, the Commissioner may recharacterize a partnership transaction if the transaction is carried out in a manner that is "inconsistent with the intent of subchapter K" and a "principal purpose" of the transaction is to reduce the present value of the partners' aggregate federal tax liability in a manner that is "inconsistent with the intent of subchapter K." The regulation contemplates that recharacterization may take various forms, including treating the partnership as an aggregate of its partners, disregarding the partnership, adjusting the allocation of tax items

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Leonard Cross, Responsible Partner, Tax; Sylvia Hartwell, Billing Partner, Tax — Calderwood & Harkness LLP
FROM: Robert Jansen, Lead Associate, Tax; Garrett Simmons, Working Associate, Tax — Calderwood & Harkness LLP
DATE: June 16, 2025
RE: IRC § 367 Inapplicability to Partnership-to-Partnership Transfers in Connection with the Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization
ENGAGEMENT: 20250527-SDILP-PLR — Solara Digital Infrastructure LP Private Letter Ruling Request
CLIENT: Solara Digital Infrastructure LP
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I. Executive Summary
This memorandum analyzes whether Internal Revenue Code ("IRC" or "Code") § 367(a) or § 367(b) applies to the contributions of portfolio assets by four foreign partnerships to a newly formed domestic partnership in connection with the proposed cross-border reorganization of Solara Digital Infrastructure LP's fund platform (the "Reorganization"). Specifically, this memorandum addresses the contributions contemplated in Steps 2 through 4 of the Reorganization, in which portfolio assets with an aggregate fair market value of approximately $7.75 billion, an aggregate adjusted tax basis of approximately $6.03 billion, and total built-in gain of approximately $1.72 billion will be contributed by the four foreign fund vehicles to the Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed.
Conclusion. Neither § 367(a) nor § 367(b) applies to the contributions described in Steps 2 through 4 of the Reorganization. The statutory language of § 367 is limited to transfers involving corporations — specifically, transfers of property by a United States person to a foreign corporation (§ 367(a)) and exchanges involving foreign corporations in the context of enumerated corporate nonrecognition provisions (§ 367(b)). Neither the contributing entities nor the receiving entity in this Reorganization is a corporation for U.S. federal income tax purposes. The contributing entities are classified as partnerships under the check-the-box regulations, and the receiving entity will likewise be classified as a partnership. Section 721 — the operative nonrecognition provision for partnership contributions — is not among the exchange provisions referenced in either § 367(a) or § 367(b). Consequently, § 367 is inapplicable on its face.
The four contributing entities are:
(1) Solara Digital Partners Fund IV-A (Cayman) LP, a Cayman Islands exempted limited partnership (EIN 98-6241503);
(2) Solara Digital Partners Fund IV-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-6241571);
(3) Solara Digital Partners Fund V-A (Cayman) LP, a Cayman Islands exempted limited partnership (EIN 98-7891234); and
(4) Solara Digital Partners Fund V-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-7891267).
The receiving entity is Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed on or around September 15, 2025, which will file a Form 8832 check-the-box election to be classified as a partnership for U.S. federal income tax purposes under Treasury Regulations ("Treas. Reg.") § 301.7701-3. Even absent this affirmative election, the entity would default to partnership classification as a domestic eligible entity with two or more members under Treas. Reg. § 301.7701-3(b)(1)(i).
This memorandum supports Ruling 3 in the proposed Private Letter Ruling ("PLR") request to be submitted to the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"). The § 367 inapplicability conclusion is one of several interrelated conclusions that collectively support the tax-free treatment of the Reorganization under IRC § 721(a).
Recommendation. We recommend that the PLR request include a specific ruling request (Ruling 3) confirming that IRC § 367 does not apply to the contributions described in Steps 2 through 4 of the Reorganization. The ruling request should be bolstered by comprehensive representations regarding entity classification elections and the partnership status of all entities involved in the transactions. Additionally, the § 367 inapplicability argument should be included in the talking points for the pre-submission conference currently scheduled for July 22, 2025, with IRS CC:INTL Branch 1, to secure early concurrence from the examining team and avoid any preliminary objection that § 367 represents a barrier to the tax-free treatment of the contributions.
II. Statement of Facts
A. Background — Solara Digital Infrastructure LP
Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership (EIN 82-4917366) founded on March 17, 2014, and headquartered at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara is a global digital infrastructure investment platform focused on data center facilities, fiber-optic networks, edge computing deployments, and enterprise software-as-a-service ("SaaS") portfolio companies. As of March 31, 2025, Solara has approximately $14.7 billion in assets under management across multiple fund vehicles and co-investment structures.
The general partner of Solara is Solara Digital Infrastructure GP LLC (EIN 82-4917365), a Delaware limited liability company managed by Viktor Raines, Managing Partner and Founder. Mr. Raines exercises ultimate investment decision-making authority over the Solara platform, subject to the advisory input of the Solara Investment Committee and the terms of the various limited partnership agreements and side letters governing the fund vehicles.
Solara operates through six parallel fund vehicles across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — to accommodate the distinct regulatory, tax, and operational requirements of U.S. taxable investors, U.S. tax-exempt investors, and non-U.S. investor pools. The parallel fund structure was initially adopted in 2016, when Solara launched its Fund IV series, and was replicated in 2019 for the Fund V series. Each fund generation consists of a Delaware-domiciled onshore vehicle (for direct U.S. taxable investor access) and two offshore parallel vehicles — one organized as a Cayman Islands exempted limited partnership and the other as a Luxembourg SCSp — to facilitate tax-efficient investment by non-U.S. investors and U.S. tax-exempt investors that seek to minimize unrelated business taxable income ("UBTI") exposure and effectively connected income ("ECI") concerns.
The parallel fund architecture has served its intended purpose but has generated increasing administrative complexity, duplicative compliance obligations, and governance inefficiencies. These concerns, together with the approaching implementation of the OECD's Pillar Two Global Anti-Base Erosion ("GloBE") rules applicable to Luxembourg entities effective for fiscal year 2025, have prompted Solara's management to pursue a comprehensive reorganization of its fund platform (the "Reorganization"), centralizing the four offshore fund vehicles into a single Delaware-domiciled master fund structure.
B. Existing Fund Vehicles Subject to Reorganization (Foreign Partnerships)
The Reorganization involves four foreign fund vehicles, each of which is classified as a partnership for U.S. federal income tax purposes. The relevant details of each fund vehicle are set forth below.
Fund IV-A Cayman. Solara Digital Partners Fund IV-A (Cayman) LP is a Cayman Islands exempted limited partnership registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Its EIN is 98-6241503. The fund's registered office is at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111, Cayman Islands. Fund IV-A Cayman has a fund size of approximately $1.85 billion and serves as the parallel fund vehicle for non-U.S. investors and certain U.S. tax-exempt investors participating in the Fund IV vintage. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company that serves as the offshore general partner entity for Solara's Cayman-domiciled vehicles. Fund IV-A Cayman is an "eligible entity" under Treas. Reg. § 301.7701-3(a) and is classified as a partnership for U.S. federal income tax purposes under the default classification rule of Treas. Reg. § 301.7701-3(b)(2)(i), which provides that a foreign eligible entity with two or more members is classified as a partnership unless it elects otherwise. Fund IV-A Cayman has not elected to be classified as a corporation. Cayman Islands exempted limited partnerships are not listed on the IRS per se corporation list for the Cayman Islands under Treas. Reg. § 301.7701-2(b)(8)(i).
Fund IV-B Luxembourg. Solara Digital Partners Fund IV-B (Luxembourg) SCSp is a Luxembourg société en commandite spéciale (special limited partnership) registered with the Luxembourg Registre de Commerce et des Sociétés under number RCS B 248193. Its EIN is 98-6241571. The fund's registered office is at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund IV-B Lux has a fund size of approximately €1.15 billion (approximately $1.24 billion at the prevailing exchange rate of 1.08 EUR/USD used throughout this memorandum unless otherwise indicated). Fund IV-B Lux serves as the parallel fund vehicle for European and Asian institutional investors participating in the Fund IV vintage. The general partner of Fund IV-B Lux is Solara Luxembourg Management S.à r.l., a Luxembourg private limited liability company (RCS B 248194). Fund IV-B Lux is an "eligible entity" under Treas. Reg. § 301.7701-3(a), and the Luxembourg SCSp is not listed on the IRS per se corporation list for Luxembourg under Treas. Reg. § 301.7701-2(b)(8)(i). Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under the default classification rule, and it has not elected corporate classification.
Fund V-A Cayman. Solara Digital Partners Fund V-A (Cayman) LP is a Cayman Islands exempted limited partnership registered with CIMA under registration number MF-89103. Its EIN is 98-7891234. The fund's registered office is at Harborstone Corporate Services Ltd., George Town, Grand Cayman, Cayman Islands. Fund V-A Cayman has a fund size of approximately $2.45 billion and serves as the parallel fund vehicle for non-U.S. investors and certain U.S. tax-exempt investors participating in the Fund V vintage. Fund V-A Cayman is classified as a partnership for U.S. federal income tax purposes under the same default classification analysis applicable to Fund IV-A Cayman, and it has not elected corporate classification.
Fund V-B Luxembourg. Solara Digital Partners Fund V-B (Luxembourg) SCSp is a Luxembourg société en commandite spéciale registered with the Luxembourg Registre de Commerce et des Sociétés under number RCS B 271056. Its EIN is 98-7891267. The fund's registered office is at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund V-B Lux has a fund size of approximately €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux serves as the parallel fund vehicle for European and Asian institutional investors participating in the Fund V vintage. Fund V-B Lux is classified as a partnership for U.S. federal income tax purposes under the same default classification analysis applicable to Fund IV-B Lux, and it has not elected corporate classification.
All four foreign entities are thus classified as partnerships for U.S. federal income tax purposes under Treas. Reg. § 301.7701-3. Each is an "eligible entity" with two or more members that has not elected corporate classification, and each falls within the default classification for a foreign eligible entity that is not a per se corporation under Treas. Reg. § 301.7701-2(b)(8).
C. Receiving Entity — Solara Consolidated Master Fund LP
Solara Consolidated Master Fund LP (the "Consolidated Master Fund" or the "Master Fund") is a Delaware limited partnership to be formed on or around September 15, 2025, as part of Step 1 of the Reorganization. The general partner of the Consolidated Master Fund will be Solara Consolidated Master Fund GP LLC, a Delaware limited liability company also to be formed as part of Step 1.
The Consolidated Master Fund will file a Form 8832 (Entity Classification Election) electing classification as a partnership for U.S. federal income tax purposes under Treas. Reg. § 301.7701-3, effective as of the date of formation. Even absent this affirmative election, the Consolidated Master Fund would be classified as a partnership by default under Treas. Reg. § 301.7701-3(b)(1)(i), which provides that a domestic eligible entity with two or more members is classified as a partnership unless it elects otherwise. The Form 8832 election is being filed out of an abundance of caution and to provide a definitive documentary record for purposes of the PLR request and ongoing compliance.
The purpose of the Consolidated Master Fund is to serve as the centralized master fund vehicle that will consolidate the portfolio assets and investment activities of the four offshore legacy vehicles into a single Delaware-domiciled feeder/master structure. Following the completion of Steps 2 through 5 of the Reorganization, the Consolidated Master Fund will hold directly or indirectly all of the portfolio company interests currently held by the four offshore vehicles, and the existing limited partners of those vehicles will hold their economic interests through the Consolidated Master Fund (either directly or through feeder vehicles, depending on the investor's regulatory and tax profile).
D. The Proposed Reorganization — Steps Relevant to This Memorandum
The Reorganization consists of five principal steps, of which Steps 2 through 4 are directly relevant to the § 367 analysis addressed in this memorandum. Each step is summarized below.
Step 1 (Target: September 15, 2025) — Formation of New Entities and Elections. Solara will cause the formation of the Consolidated Master Fund LP and its general partner, Solara Consolidated Master Fund GP LLC, under Delaware law. Simultaneously, Form 8832 elections will be filed for the Consolidated Master Fund and its GP LLC (the latter electing to be classified as a disregarded entity), effective as of the date of formation. Step 1 does not involve any transfer of property and raises no § 367 issue.
Step 2 (Target: October 1, 2025) — Fund IV-A Cayman Contribution. 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 Consolidated Master Fund. The aggregate fair market value of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in built-in gain of approximately $690 million. The key portfolio company interests to be contributed in Step 2 include:
• NovaBright Data Systems Inc. — Fund IV-A Cayman holds a 60% interest in NovaBright Data Systems Inc., a Delaware corporation that operates a network of hyperscale data center facilities across the eastern United States. NovaBright has an aggregate fair market value of $890 million and an aggregate adjusted tax basis of $520 million (built-in gain of $370 million). The 60% interest attributable to Fund IV-A Cayman has a fair market value of $534 million, an adjusted tax basis of $312 million, and built-in gain of $222 million. The remaining 40% interest is held by the onshore Fund IV vehicle (Solara Digital Partners Fund IV LP, the Delaware limited partnership not subject to the Reorganization).
• Thorngate Fiber Networks LP — Fund IV-A Cayman holds a 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership that owns and operates approximately 14,000 miles of dark and lit fiber-optic network infrastructure in the mid-Atlantic and southeastern United States. Thorngate has a fair market value of $670 million, an adjusted tax basis of $490 million, and built-in gain of $180 million.
The Step 2 contribution is intended to qualify for nonrecognition treatment under IRC § 721(a), with carryover basis under § 723 and holding period tacking under § 1223(2).
Step 3 (Target: October 15, 2025) — Fund IV-B Luxembourg Contribution. 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. The aggregate fair market value of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in built-in gain of approximately €288 million (approximately $311 million). The key portfolio company interest to be contributed in Step 3 is:
• Crestline Cloud Solutions LLC — Fund IV-B Lux holds a 100% interest in Crestline Cloud Solutions LLC, a Delaware limited liability company classified as a disregarded entity for U.S. federal income tax purposes that provides cloud-based enterprise resource planning solutions to mid-market companies in the DACH region and Benelux countries. Crestline has a fair market value of €340 million (approximately $367 million), an adjusted tax basis of €195 million (approximately $211 million), and built-in gain of €145 million (approximately $156 million).
The Step 3 contribution is intended to qualify for nonrecognition treatment under IRC § 721(a).
Step 4 (Target: November 1, 2025) — Fund V-A Cayman and Fund V-B Luxembourg Contributions. On or about November 1, 2025, Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will simultaneously contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests.
Fund V-A (Cayman) LP's contribution will have an aggregate fair market value of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and built-in gain of approximately $550 million. The key portfolio company interests to be contributed by Fund V-A Cayman include:
• Veridian Edge Computing Corp. — Fund V-A Cayman holds a 55% interest in Veridian Edge Computing Corp., a Delaware corporation that deploys and manages edge computing infrastructure for telecommunications carriers and hyperscale cloud providers. Veridian has an aggregate fair market value of $1.12 billion and an aggregate adjusted tax basis of $780 million (built-in gain of $340 million). The 55% interest attributable to Fund V-A Cayman has a fair market value of $616 million, an adjusted tax basis of $429 million, and built-in gain of $187 million.
• Helix SaaS Holdings Ltd. — Fund V-A Cayman holds a 100% interest in Helix SaaS Holdings Ltd., a Cayman Islands exempted company that operates a portfolio of vertical SaaS platforms serving the logistics, healthcare, and financial services sectors. Helix has a fair market value of $445 million, an adjusted tax basis of $310 million, and built-in gain of $135 million.
Fund V-B (Luxembourg) SCSp's contribution will have an aggregate fair market value of approximately €1.29 billion (approximately $1.39 billion at 1.08 EUR/USD), an aggregate adjusted tax basis of approximately €1.14 billion (approximately $1.23 billion), and built-in gain of approximately €150 million (approximately $162 million).
The Step 4 contributions are intended to qualify for nonrecognition treatment under IRC § 721(a).
Aggregate Liabilities. Across Steps 2 through 4, the Consolidated Master Fund will assume aggregate liabilities of approximately $1.34 billion in portfolio-level debt currently held across the four offshore vehicles. The liability assumption will be analyzed for purposes of IRC § 752 in a separate companion memorandum.
Aggregate Contribution Summary. In total, the four foreign partnerships will contribute assets with an aggregate fair market value of $7.75 billion, an aggregate adjusted tax basis of $6.03 billion, and total built-in gain of $1.72 billion to the Consolidated Master Fund LP. Each of these contributions is intended to be treated as a tax-free contribution under IRC § 721(a), with carryover basis under § 723 and holding period tacking under § 1223(2).
The Question Addressed. The central question addressed in this memorandum is whether IRC § 367 imposes any additional conditions, gain recognition requirements, or reporting obligations on the contributions described in Steps 2 through 4 — that is, whether the cross-border nature of the contributing entities (foreign partnerships) triggers any application of the international toll-charge provisions of § 367(a) or the regulatory authority of § 367(b), notwithstanding that the contributions are structured as partnership-to-partnership transfers under § 721(a).
E. Key Investors Affected
The § 367 analysis is of direct concern to several categories of investors in the offshore fund vehicles, as any gain recognition or reporting obligations triggered by § 367 would flow through to the partners of the contributing foreign partnerships under the aggregate and conduit principles of Subchapter K.
Non-U.S. Investors. The non-U.S. investors contributing through the offshore vehicles include, among others:
• Nordhaven Sovereign Wealth Fund — a sovereign wealth fund of the Kingdom of Nordhaven, with $380 million committed to Fund IV-A Cayman and $500 million committed to Fund V-A Cayman. The primary contact for Nordhaven is Anders Bjørkman, Director of Alternative Investments.
• Kestrel Pacific Insurance Group — a Singapore-based multinational insurance conglomerate, with €200 million committed to Fund IV-B Lux and €275 million committed to Fund V-B Lux. The primary contact for Kestrel Pacific is Christine Leung, Head of Private Markets.
U.S. Tax-Exempt Investors. The U.S. tax-exempt investors that participate through the Cayman parallel vehicles (to minimize UBTI exposure) include, among others:
• Pinnacle State Employees' Retirement System — a state pension fund with $275 million committed to Fund IV vehicles and $340 million committed to Fund V vehicles.
• Grandview University Endowment — a university endowment fund with $120 million committed to Fund IV vehicles and $185 million committed to Fund V vehicles.
Independent Tax Counsel. Bramhall & Quelwick LLP (Jason Tremaine, Partner, International Tax; 44 Montgomery Street, Suite 3600, San Francisco, California 94104) has been retained as independent tax counsel by Nordhaven Sovereign Wealth Fund to evaluate U.S. withholding tax and treaty implications of the Reorganization. The § 367 analysis is relevant to Bramhall & Quelwick's review, as any gain recognition triggered by § 367 could affect the withholding tax analysis under § 1441, § 1442, or § 1446. We anticipate that Bramhall & Quelwick will request a copy of this memorandum or a summary of its conclusions, subject to appropriate confidentiality protections and common interest privilege considerations.
III. Issues Presented
This memorandum addresses the following four issues:
Issue 1. Does IRC § 367(a)(1) apply to the contribution of property by a foreign partnership to a domestic partnership, such that the contributing foreign partnership (or its partners) must recognize gain on the transfer?
Issue 2. Does IRC § 367(b) apply to an exchange in which a foreign partnership transfers property to a domestic partnership in a transaction described in § 721(a), such that the IRS has regulatory authority to require income inclusion or other adjustments?
Issue 3. If § 367 does not apply by its terms, is there any IRS guidance, judicial decision, or legislative history suggesting that the policies underlying § 367 should be extended by analogy to partnership-to-partnership transfers?
Issue 4. Do any anti-abuse rules, including Treas. Reg. § 1.701-2 or substance-over-form principles, provide an alternative basis for the IRS to apply § 367-type consequences to these transfers?
IV. Short Answer
Issue 1 — § 367(a). Section 367(a) does not apply. By its express terms, § 367(a)(1) is triggered only by a transfer of property "by a United States person . . . to a foreign corporation" in connection with an exchange described in §§ 332, 351, 354, 355, 356, or 361. In the Solara Reorganization, none of these three required elements is satisfied. First, the transferors (Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux) are foreign partnerships, not United States persons as defined in § 7701(a)(30). To the extent one might look through the foreign partnerships to their partners, some of whom are U.S. persons, the transfer is still not "to a foreign corporation" — it is to a domestic partnership. Second, the Consolidated Master Fund LP is classified as a partnership, not as a corporation. Third, the contributions are governed by § 721(a), not by any of the corporate nonrecognition provisions enumerated in § 367(a)(1). The transfer runs from foreign partnerships to a domestic partnership — the opposite direction from a § 367(a) outbound transfer to a foreign corporation.
Issue 2 — § 367(b). Section 367(b) does not apply. It is triggered only by an "exchange described in section 332, 351, 354, 355, 356, or 361 in connection with which there is no transfer of property described in subsection (a)," where a "foreign corporation" is a party to the exchange. Section 721 is not among the listed exchange provisions in § 367(b)(1), and no foreign corporation is a party to any of the contributions at issue. The regulations under § 367(b) (Treas. Reg. §§ 1.367(b)-1 through -13) uniformly address corporate transactions and contain no provisions applicable to partnership contributions under § 721.
Issue 3 — Extension by Analogy. No case law, revenue ruling, or private letter ruling has applied § 367 to a partnership-to-partnership contribution under § 721. To the contrary, Congress's enactment of IRC § 721(c) in 2017 — which creates a separate, partnership-specific gain recognition regime — demonstrates Congress's understanding that § 367 does not reach partnership contributions and that any toll-charge mechanism for partnerships requires separate statutory authority.
Issue 4 — Anti-Abuse Rules. While the anti-abuse rule of Treas. Reg. § 1.701-2 and general substance-over-form principles could theoretically apply to any partnership transaction, the Reorganization has independent and substantial business purposes that provide adequate justification. These purposes include: (i) operational cost reduction of approximately $3.8 million annually in duplicative offshore administration, audit, and regulatory fees; (ii) compliance with the OECD Pillar Two GloBE rules effective for Luxembourg entities beginning in fiscal year 2025; (iii) simplified FATCA and CRS compliance across investor pools; (iv) LP-requested governance simplification; and (v) consolidation of twenty-three portfolio company holdings across four offshore vehicles into a single master fund platform. Moreover, the built-in gain of $1.72 billion will carry over to the Consolidated Master Fund under § 704(c), preserving the eventual recognition of gain. No gain is permanently avoided.
V. Analysis
A. Statutory Text of IRC § 367(a)
1. The Statutory Language
IRC § 367(a)(1) provides, in relevant part:
"If, in connection with any exchange described in section 332, 351, 354, 355, 356, or 361, a United States person transfers property to a foreign corporation, such foreign corporation shall not, for purposes of determining the extent to which gain shall be recognized on such transfer, be considered to be a corporation."
The operative effect of § 367(a)(1) is to deny nonrecognition treatment for outbound transfers of appreciated property to foreign corporations. By providing that the foreign corporation "shall not . . . be considered to be a corporation," the statute effectively converts what would otherwise be a tax-free corporate nonrecognition transaction into a taxable exchange, requiring the U.S. transferor to recognize gain to the extent the fair market value of the transferred property exceeds its adjusted tax basis. This mechanism is commonly referred to as the "toll charge" on outbound transfers.
2. The Three Textual Prerequisites
Section 367(a)(1) contains three textual elements, each of which must be satisfied for the provision to apply:
First, the transfer must occur "in connection with any exchange described in section 332, 351, 354, 355, 356, or 361." These provisions are the corporate nonrecognition provisions of Subchapter C. Section 332 addresses liquidations of subsidiaries. Section 351 addresses transfers to controlled corporations. Sections 354, 355, and 356 address corporate reorganizations and distributions. Section 361 addresses nonrecognition of gain or loss to corporations that are parties to reorganizations. Notably, § 721 — the partnership nonrecognition provision — is not among the enumerated sections. This omission is significant and, as discussed below, is consistent with the entire statutory framework of § 367, which was designed to police corporate, not partnership, nonrecognition transactions.
Second, the transferor must be a "United States person." Section 7701(a)(30) defines "United States person" to include, among others, a citizen or resident of the United States, a domestic partnership, a domestic corporation, and a domestic estate or trust. Foreign partnerships are not United States persons. While U.S. partners of a foreign partnership may individually be United States persons, the entity-level transferor in a § 721(a) contribution is the partnership itself.
Third, the transferee must be a "foreign corporation." Section 7701(a)(5) defines "foreign corporation" as a corporation that is not domestic. A partnership — whether domestic or foreign — is not a corporation. The transferee in each of the Steps 2 through 4 contributions is the Consolidated Master Fund LP, a Delaware limited partnership classified as a partnership for U.S. federal income tax purposes.
3. Application to the Solara Reorganization
Applying these three textual prerequisites to the Solara Reorganization demonstrates that § 367(a)(1) is inapplicable to the contributions described in Steps 2 through 4.
The contributing entities are not United States persons. Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP are Cayman Islands exempted limited partnerships. Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp are Luxembourg special limited partnerships. All four entities are organized under foreign law and are classified as foreign partnerships under § 7701(a)(2) (defining "partnership" to include "a syndicate, group, pool, joint venture, or other unincorporated organization . . . which is not . . . a corporation, trust, or estate") and § 7701(a)(5) (a foreign entity is one that is not "domestic" as defined in § 7701(a)(4)). None of the contributing entities is a "United States person" within the meaning of § 7701(a)(30). Even to the extent that some of the ultimate partners of these foreign partnerships are themselves U.S. persons (e.g., Pinnacle State Employees' Retirement System and Grandview University Endowment), the entity-level analysis under § 367(a)(1) looks to the transferor, which in each case is the foreign partnership. Moreover, even if one were to look through to the U.S. partners, the transfer is not "to a foreign corporation" — it is to a domestic partnership.
The receiving entity is not a foreign corporation. The Consolidated Master Fund LP is a Delaware limited partnership that will be classified as a partnership for U.S. federal income tax purposes. It is not a corporation — foreign or domestic — under the Code. The entity will file a Form 8832 election confirming its partnership classification as of the date of formation, and no circumstances suggest that the entity could be treated as an association taxable as a corporation under Treas. Reg. § 301.7701-2. Even in the absence of the Form 8832 election, a domestic eligible entity with two or more members defaults to partnership classification under Treas. Reg. § 301.7701-3(b)(1)(i). Because the Consolidated Master Fund is not a "foreign corporation" within the meaning of § 367(a)(1), the statute simply has no application.
The exchange is not described in the enumerated sections. The contributions by the four foreign partnerships to the Consolidated Master Fund LP are governed by § 721(a), which provides that "[n]o gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership." Section 721(a) is a partnership-specific nonrecognition provision in Subchapter K of the Code. It is not described in, and does not cross-reference, any of the corporate nonrecognition provisions listed in § 367(a)(1) (§§ 332, 351, 354, 355, 356, or 361). The contributions at issue are not transfers to a controlled corporation (§ 351), liquidating distributions (§ 332), or exchanges pursuant to a corporate reorganization (§§ 354, 355, 356, 361). They are partnership contributions, governed exclusively by the Subchapter K regime.
Conclusion. None of the three required elements of § 367(a)(1) is satisfied. The statute is inapplicable on its face to the contributions described in Steps 2 through 4 of the Reorganization.
B. Statutory Text of IRC § 367(b)
1. The Statutory Language
IRC § 367(b)(1) provides:
"In the case of any exchange described in section 332, 351, 354, 355, 356, or 361 in connection with which there is no transfer of property described in subsection (a), a foreign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes."
Unlike § 367(a), which operates as a self-executing toll charge, § 367(b) grants the Secretary of the Treasury regulatory authority to prescribe adjustments — including gain recognition, income inclusions, and other consequences — in the context of exchanges involving foreign corporations that are not covered by § 367(a). Section 367(b) was designed primarily to address "inbound" transactions (such as the liquidation of a foreign subsidiary into a U.S. parent under § 332) and "foreign-to-foreign" transactions (such as cross-border corporate reorganizations among foreign corporations), where the concern is the loss of accumulated earnings and profits or the conversion of ordinary income into capital gain.
2. The Two Textual Prerequisites
Section 367(b)(1) contains two key textual elements:
First, the exchange must be "described in section 332, 351, 354, 355, 356, or 361." This is the identical list of corporate nonrecognition provisions referenced in § 367(a)(1). As with § 367(a), § 721 is not among the enumerated sections.
Second, the provision must involve a "foreign corporation" — specifically, the statute provides that "a foreign corporation shall be considered to be a corporation except to the extent provided in regulations." The regulatory authority granted under § 367(b) extends only to exchanges in which the status of a foreign corporation as a party to the exchange is relevant to the application of the corporate nonrecognition provisions.
3. Application to the Solara Reorganization
Section 367(b) is inapplicable to the Solara Reorganization for the same structural reasons that render § 367(a) inapplicable.
The contributions are described in § 721, not in the enumerated corporate nonrecognition provisions. As discussed above, § 721 is not listed among the exchange provisions in § 367(b)(1). The legislative choice to reference only §§ 332, 351, 354, 355, 356, and 361 — all of which are Subchapter C provisions applicable to corporations — reflects Congress's intent to limit the reach of § 367(b) to corporate transactions. Partnership contributions under § 721 are an entirely distinct nonrecognition regime under Subchapter K, and the omission of § 721 from the text of § 367(b)(1) is dispositive.
No foreign corporation is a party to the contributions. The contributing entities are foreign partnerships, and the receiving entity is a domestic partnership. No foreign corporation — indeed, no corporation of any kind — is involved in any of the Steps 2 through 4 contributions. The regulatory authority granted under § 367(b) is predicated on the involvement of a foreign corporation whose status as a corporation is relevant to the exchange. Where no corporation is present, the regulatory authority simply does not arise.
The regulations under § 367(b) do not address partnership transactions. The extensive body of regulations promulgated under § 367(b) — Treas. Reg. §§ 1.367(b)-1 through 1.367(b)-13 — uniformly addresses corporate transactions. These regulations address topics such as the carryover of earnings and profits in corporate reorganizations (Treas. Reg. § 1.367(b)-3), the recognition of gain in certain § 332 liquidations of foreign subsidiaries (Treas. Reg. § 1.367(b)-3(b)), and the "all-earnings-and-profits" inclusion required in connection with inbound corporate reorganizations (Treas. Reg. § 1.367(b)-4). Not a single regulation under § 367(b) addresses or purports to address contributions to partnerships under § 721 or distributions from partnerships under § 731.
Conclusion. Section 367(b) is inapplicable by its express terms to the contributions described in Steps 2 through 4 of the Reorganization.
C. Legislative History of § 367
The legislative history of § 367 confirms that Congress intended the provision to apply exclusively to transfers involving corporations and did not contemplate its application to partnership-level transfers under Subchapter K.
1. Original Enactment (1954)
Section 367 was originally enacted as part of the Internal Revenue Code of 1954. The original version of § 367 required a United States person to obtain an advance ruling from the IRS before transferring property to a foreign corporation in a nonrecognition transaction. The advance-ruling requirement was designed to give the IRS the opportunity to impose conditions on the transfer — such as gain-recognition agreements or other protective measures — to ensure that the outbound transfer of appreciated property to a foreign corporation did not result in the permanent avoidance of U.S. tax on the built-in gain. The 1954 legislative history makes clear that the provision was targeted at corporate transactions and was motivated by the concern that U.S. taxpayers could use § 351 (transfers to controlled corporations) and the corporate reorganization provisions to shift appreciated assets to foreign corporations beyond the reach of the U.S. taxing jurisdiction.
2. Tax Reform Act of 1976
Congress significantly amended § 367 in the Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520 (1976). The 1976 amendments replaced the advance-ruling requirement with the self-executing toll-charge mechanism now found in § 367(a)(1), while simultaneously adding § 367(b) to address inbound and other exchanges involving foreign corporations. The Senate Finance Committee Report (S. Rep. No. 94-938, at 265 (1976)) explained that the amendments were necessary because the advance-ruling process was administratively burdensome and allowed taxpayers to complete outbound corporate transfers before obtaining a ruling, rendering the ruling process ineffective. Throughout the committee reports and floor statements, the discussion focused exclusively on transfers involving corporations — no committee report, floor statement, or conference report mentions partnerships, limited partnerships, or transfers under § 721.
3. Tax Reform Act of 1986
The Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085 (1986), further tightened the outbound transfer rules under § 367. The 1986 amendments expanded the scope of § 367(d) to address transfers of intangible property to foreign corporations, imposing a deemed-royalty regime to prevent the expatriation of valuable intellectual property. The Joint Committee on Taxation's General Explanation of the Tax Reform Act of 1986 (JCS-10-87, at 924–31) discussed the § 367 amendments exclusively in the context of corporate transactions. No reference was made to partnerships or to any extension of the toll-charge concept to Subchapter K transactions.
4. Tax Cuts and Jobs Act of 2017 — Enactment of § 721(c)
Perhaps the most significant legislative development for purposes of the present analysis is the enactment of IRC § 721(c) as part of the Tax Cuts and Jobs Act of 2017 ("TCJA"), Pub. L. No. 115-97, 131 Stat. 2054 (2017). Section 721(c) provides a separate gain-recognition rule for contributions of appreciated property to a "Section 721(c) partnership" — generally defined as a partnership in which a U.S. transferor and a related foreign person are partners. The provision was enacted to address the perceived gap in the Code created by the inapplicability of § 367 to partnership contributions.
The significance of § 721(c) to the present analysis cannot be overstated. Congress enacted § 721(c) precisely because § 367 did not reach partnership transactions. If § 367 already applied to partnership contributions, § 721(c) would have been entirely unnecessary — there would have been no need for a separate statutory provision addressing the same concern. The enactment of § 721(c) thus represents a clear congressional acknowledgment that § 367 does not, and was not intended to, apply to contributions of property to partnerships under § 721(a). This is a powerful inference of congressional understanding and intent that reinforces the textual analysis set forth above.
5. Summary. Throughout the entire legislative history of § 367 — from its original enactment in 1954 through the most recent amendments in 2017 — Congress focused exclusively on transfers involving corporations. The Subchapter K provisions (§§ 721–761) operate as a separate and distinct nonrecognition regime. Congress chose not to enact a § 367 analogue for partnerships; instead, when it perceived a need to address the potential for tax avoidance through partnership contributions, it enacted § 721(c) as a targeted, partnership-specific provision. This legislative history unambiguously supports the conclusion that § 367 is inapplicable to the partnership-to-partnership contributions contemplated in the Solara Reorganization.
D. Treasury Regulations Under § 367
1. Regulations Under § 367(a)
The Treasury regulations under § 367(a) — Treas. Reg. §§ 1.367(a)-1 through 1.367(a)-8 — provide detailed guidance on the application of the outbound transfer toll charge. These regulations define "transfer" (Treas. Reg. § 1.367(a)-1(b)), identify the categories of property subject to the toll charge and the exceptions thereto (Treas. Reg. §§ 1.367(a)-2 through -4), and establish the gain recognition agreement ("GRA") regime for certain transfers of stock and securities (Treas. Reg. §§ 1.367(a)-3 and -8). Treas. Reg. § 1.367(a)-1(b)(1) defines "transfer" by reference to "a transfer described in section 351, 354, 355, 356, or 361." Section 721 is not included in this definition. Every provision of the § 367(a) regulations references corporate transferees exclusively. No regulation under § 367(a) addresses or purports to address contributions to partnerships under § 721.
The active trade or business exception under Treas. Reg. § 1.367(a)-2 — one of the most commonly invoked exceptions to the § 367(a)(1) toll charge — is framed entirely in terms of a transfer of assets "to a foreign corporation for use . . . in the active conduct of a trade or business outside the United States." The exception simply has no analog in the partnership context, because the toll charge it modifies does not apply to partnership contributions in the first instance.
2. Regulations Under § 367(b)
The Treasury regulations under § 367(b) — Treas. Reg. §§ 1.367(b)-1 through 1.367(b)-13 — provide comprehensive guidance on the adjustments required in connection with exchanges involving foreign corporations. These regulations address topics including:
• The "all-earnings-and-profits" inclusion required in certain inbound corporate reorganizations (Treas. Reg. § 1.367(b)-3);
• The recognition of § 1248 amounts in exchanges of stock of controlled foreign corporations (Treas. Reg. § 1.367(b)-4);
• The treatment of foreign-to-foreign corporate reorganizations (Treas. Reg. §§ 1.367(b)-4 through -7);
• Special rules for § 355 distributions involving foreign corporations (Treas. Reg. § 1.367(b)-5); and
• Notice and reporting requirements applicable to exchanges involving foreign corporations (Treas. Reg. § 1.367(b)-1(c) and (d)).
Without exception, these regulations address corporate transactions and are predicated on the involvement of foreign corporations as parties to the exchanges. No regulation under § 367(b) addresses contributions to partnerships under § 721 or distributions from partnerships under § 731. The regulations contain no provision that could be read to extend § 367(b) to partnership-level transactions, either by direct application or by analogy.
3. Summary. The comprehensive body of regulations under § 367 — spanning dozens of regulatory sections and hundreds of pages of regulatory text — is directed exclusively at corporate transactions. The Treasury Department, in exercising its regulatory authority under both § 367(a) and § 367(b), has never promulgated a regulation that addresses or purports to address partnership contributions under § 721. This consistent regulatory treatment further confirms that § 367 does not reach the partnership-to-partnership contributions contemplated in the Solara Reorganization.
E. Relevant IRS Guidance and Rulings
1. Published Revenue Rulings
A comprehensive survey of published revenue rulings reveals no ruling that applies § 367 to a partnership-to-partnership transfer under § 721. The published rulings under § 367 uniformly address corporate transactions — including outbound transfers of property to foreign corporations under § 351, liquidations of foreign subsidiaries under § 332, and corporate reorganizations under §§ 354, 355, 356, and 361. The absence of any published ruling extending § 367 to partnership transactions is consistent with the textual and legislative history analysis set forth above.
2. Private Letter Rulings
A survey of publicly available private letter rulings, prepared by Garrett Simmons in a companion Research Memorandum — Survey of Analogous PLRs (Engagement 20250527-SDILP-PLR, dated June 12, 2025), identified no PLR that has applied § 367 to a contribution of property by a foreign partnership to a domestic partnership. While private letter rulings do not constitute binding precedent and may not be cited as authority under § 6110(k)(3), the absence of any such ruling is notable and suggests that neither taxpayers nor the IRS has previously taken the position that § 367 applies to partnership contributions under § 721.
3. IRS Notice 2015-54 and the § 721(c) Regulations
IRS Notice 2015-54, 2015-34 I.R.B. 210, is a pivotal piece of IRS guidance for purposes of this analysis. Notice 2015-54 announced the Treasury Department's and the IRS's intention to issue regulations under new § 721(c) addressing contributions of appreciated property to partnerships with related foreign partners. The Notice was promulgated precisely because § 367 did not apply to such partnership contributions. The Notice stated:
"Under current law, section 367 does not apply to contributions of property to a partnership. Accordingly, a U.S. person generally may contribute appreciated property to a partnership in which a related foreign person is a partner without recognizing gain at the time of the contribution."
This express statement by the Treasury Department and the IRS confirms the government's own understanding that § 367 does not apply to contributions of property to partnerships under § 721(a). The subsequent regulations under § 721(c) — Treas. Reg. §§ 1.721(c)-1 through 1.721(c)-7 — create a separate gain-recognition regime specifically for contributions of property by U.S. transferors to partnerships with related foreign partners. This regime would have been entirely unnecessary if § 367 already covered the same ground. The existence of the § 721(c) regime is powerful evidence — indeed, perhaps the most compelling evidence available — that § 367 does not, and was not intended to, apply to partnership contributions.
F. Case Law
1. Absence of Case Law Applying § 367 to Partnerships
No reported case has applied § 367 to a transfer between partnerships or to a contribution under § 721. This absence of case law is significant because § 367 has been the subject of substantial litigation over the decades, and the Tax Court, the Court of Federal Claims, and the federal circuit courts have addressed numerous issues under § 367 — including the scope of the active trade or business exception, the validity of gain recognition agreements, and the application of the toll charge to various categories of property. Despite this extensive body of case law, no court has extended § 367 beyond the corporate context.
2. Decisions Confirming the Textual Limits of § 367
Courts that have addressed the scope of § 367 have consistently applied the statute according to its terms, requiring the presence of a corporation and an exchange described in the enumerated provisions. Decisions have emphasized that § 367 is a specific anti-avoidance provision targeted at corporate nonrecognition transactions, not a general anti-abuse rule of broad application. Courts have declined to extend § 367 beyond its textual reach, even in cases where the government argued that policy considerations warranted a broader reading. This judicial approach is consistent with the principle that provisions imposing gain recognition requirements are to be strictly construed, and that taxpayers are entitled to rely on the plain language of the statute.
3. Hybrid Entity Decisions
A potential counterargument might draw on cases involving "hybrid" entities — entities that are classified as corporations for U.S. tax purposes but as partnerships or other transparent entities under foreign law. In such cases, § 367 has been applied because the entity's U.S. tax classification as a corporation brings the transaction within the statute's textual requirements. However, these cases actually support the present analysis: they confirm that § 367 applies only when the entity involved is classified as a corporation for U.S. tax purposes. Where an entity is classified as a partnership — regardless of its foreign-law characterization — § 367 does not apply.
Importantly, none of the entities involved in the Solara Reorganization is on the IRS per se corporation list under Treas. Reg. § 301.7701-2(b)(8). Neither Cayman Islands exempted limited partnerships nor Luxembourg sociétés en commandite spéciale are per se corporations, and none of the entities has elected (or will elect) to be classified as a corporation under Treas. Reg. § 301.7701-3(c). Accordingly, there is no basis for treating any of the entities involved as a corporation, and no hybrid-entity analysis is necessary.
G. Interaction with IRC § 721(c)
1. The § 721(c) Regime
IRC § 721(c), enacted as part of the TCJA in 2017, provides a gain-recognition rule for contributions of appreciated property to a "Section 721(c) partnership." A Section 721(c) partnership is generally defined as a partnership in which (i) a U.S. transferor contributes appreciated property, and (ii) a related foreign person is a direct or indirect partner. Under § 721(c), the U.S. transferor must recognize gain on the contribution unless the partnership adopts the "gain deferral method" described in Treas. Reg. § 1.721(c)-3, which requires, among other things, the use of the remedial allocation method under § 704(c) and the recognition of gain upon certain acceleration events.
2. Significance for the § 367 Analysis
The analysis of whether § 721(c) itself applies to the Solara Reorganization is addressed in a separate companion memorandum (Tax Memorandum — IRC § 721(a) Contribution Analysis, Engagement 20250527-SDILP-PLR). For purposes of this § 367 memorandum, the key point is that Congress enacted § 721(c) as a gap-filler — a targeted statutory response to the specific concern that appreciated property could be contributed to partnerships with related foreign partners without triggering gain recognition, precisely because § 367 did not reach such transactions. The existence of § 721(c) reinforces the conclusion that § 367 itself does not apply to partnership contributions.
3. Directional and Structural Distinction
An important analytical distinction must be drawn between the type of transaction that § 721(c) addresses and the type of transaction involved in the Solara Reorganization. Section 721(c) addresses contributions by U.S. persons to partnerships with related foreign partners — an outbound-type concern at the partner level, where the worry is that appreciated property will be shifted to a partnership in which foreign partners can receive allocations of gain without being subject to U.S. tax.
The Solara Reorganization, by contrast, involves contributions by foreign partnerships to a domestic partnership. This is directionally and structurally the opposite of the scenario that § 721(c) was designed to address. The Reorganization moves assets into the United States, not out of it. The Consolidated Master Fund is a Delaware limited partnership, and the portfolio assets will be held by a domestic entity following the contributions. If anything, the Reorganization increases the U.S. nexus of the portfolio assets and may expand U.S. reporting and compliance obligations.
Even assuming that § 721(c) does not squarely apply to the Solara Reorganization — an issue that is analyzed in the companion memorandum — the important point for present purposes is that § 367 certainly does not reach the transaction. The two regimes (§ 367 and § 721(c)) address different types of transactions, and neither covers the specific configuration of the Solara Reorganization's Steps 2 through 4 contributions.
H. Entity Classification — Ensuring § 367 Does Not Apply Through Reclassification
1. The Importance of Entity Classification
The § 367 inapplicability analysis set forth in this memorandum is predicated on the classification of all entities involved — both the contributing entities and the receiving entity — as partnerships for U.S. federal income tax purposes. If any entity were reclassified as a corporation (whether through an IRS challenge to the check-the-box elections, a retroactive reclassification, or otherwise), § 367 could potentially be implicated. For this reason, it is essential that the entity classification of all entities is thoroughly documented and that the PLR request includes robust representations on this point.
2. Cayman Islands Exempted Limited Partnerships
Fund IV-A (Cayman) LP, Fund V-A (Cayman) LP, and the other Cayman-domiciled vehicles in the Solara platform are organized as Cayman Islands exempted limited partnerships under the Exempted Limited Partnership Act (2021 Revision) of the Cayman Islands. The Cayman Islands exempted limited partnership is not listed on the IRS per se corporation list under Treas. Reg. § 301.7701-2(b)(8)(i) for the Cayman Islands. As foreign eligible entities with two or more members that have not elected corporate classification, Fund IV-A Cayman and Fund V-A Cayman default to partnership classification under Treas. Reg. § 301.7701-3(b)(2)(i). This default classification has been in effect since the formation of each entity, and no election to change classification has been filed or is contemplated.
3. Luxembourg SCSps
Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp are organized as Luxembourg sociétés en commandite spéciale under the Luxembourg law of July 12, 2013 (as amended). The Luxembourg SCSp is not listed on the IRS per se corporation list for Luxembourg under Treas. Reg. § 301.7701-2(b)(8)(i). As foreign eligible entities with two or more members that have not elected corporate classification, Fund IV-B Lux and Fund V-B Lux default to partnership classification under Treas. Reg. § 301.7701-3(b)(2)(i). This default classification has been in effect since the formation of each entity, and no election to change classification has been filed or is contemplated.
4. Solara Consolidated Master Fund LP
The Consolidated Master Fund LP will be organized as a Delaware limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del. C. §§ 17-101 et seq.). As a domestic eligible entity with two or more members, it will default to partnership classification under Treas. Reg. § 301.7701-3(b)(1)(i). The entity will also file a Form 8832 election confirming partnership classification, effective as of the date of formation. There is no basis for treating the entity as an association taxable as a corporation, as it will be a genuine limited partnership with a general partner (Solara Consolidated Master Fund GP LLC) and multiple limited partners (including the four contributing foreign partnerships, which will hold limited partnership interests following the contributions).
5. Cross-Reference and Risk Assessment
The detailed entity classification analysis is set forth in the companion Tax Memorandum — Entity Classification Under Treas. Reg. § 301.7701-3 (Engagement 20250527-SDILP-PLR). The risk that any entity involved in the Reorganization could be reclassified as a corporation is assessed as remote, given the regulatory framework and the clear partnership characteristics of all entities. Nonetheless, this risk should be addressed through specific representations in the PLR request (as discussed in Section VI below), and the § 367 inapplicability conclusion should be expressly conditioned on the maintenance of partnership classification for all entities.
If any entity were reclassified as a corporation — a scenario we consider highly unlikely — the implications for the § 367 analysis would need to be reassessed. For example, if the Consolidated Master Fund were reclassified as a corporation, the contributions in Steps 2 through 4 could potentially be treated as transfers to a corporation (albeit a domestic corporation, not a foreign corporation), which could implicate § 367(b) (to the extent any contributing entity were treated as a foreign corporation in that scenario). However, given that the contributing entities are partnerships (not corporations), even a reclassification of the receiving entity would not bring the transaction within § 367(a), which requires a transfer "to a foreign corporation."
I. Anti-Abuse and Policy Considerations
1. Partnership Anti-Abuse Rule — Treas. Reg. § 1.701-2
Treas. Reg. § 1.701-2 provides a general anti-abuse rule for partnership transactions. Under this regulation, the Commissioner may recharacterize a partnership transaction if the transaction is carried out in a manner that is "inconsistent with the intent of subchapter K" and a "principal purpose" of the transaction is to reduce the present value of the partners' aggregate federal tax liability in a manner that is "inconsistent with the intent of subchapter K." The regulation contemplates that recharacterization may take various forms, including treating the partnership as an aggregate of its partners, disregarding the partnership, adjusting the allocation of tax items

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