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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

TAX MEMORANDUM

CALDERWOOD & HARKNESS LLP 1900 K Street NW, Suite 1100 Washington, DC 20006

June 16, 2025

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

From: Robert Jansen, Lead Associate, Tax Garrett Simmons, Working Associate, Tax

Re: IRC § 721(a) Contribution Analysis — Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization

Engagement Number: 20250527-SDILP-PLR

Client: Solara Digital Infrastructure LP

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I. Executive Summary

This memorandum analyzes the application of Section 721(a) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), to the contributions of portfolio assets by four Legacy Offshore Vehicles (as defined below) to the newly formed Solara Consolidated Master Fund LP (the "Master Fund" or "Master Fund LP") in Steps 2 through 4 of the proposed multi-step reorganization (the "Reorganization"). The four Legacy Offshore Vehicles contributing assets to the Master Fund are: (i) Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman"), (ii) Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux"), (iii) Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman"), and (iv) Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux," and together with Fund IV-A Cayman, Fund IV-B Lux, and Fund V-A Cayman, the "Legacy Offshore Vehicles").

Conclusion. Based on our analysis of the applicable statutory provisions, Treasury Regulations, and relevant authorities, we conclude that each contribution of portfolio assets in Steps 2 through 4 of the Reorganization qualifies as a tax-free contribution of property to a partnership under IRC § 721(a). Accordingly, no gain or loss is recognized by any contributing Legacy Offshore Vehicle, and no gain or loss is recognized by the partners of any contributing Legacy Offshore Vehicle, upon the completion of such contributions.

Ancillary Conclusions. We further conclude that (i) the Master Fund LP takes a carryover basis in each contributed asset equal to the contributing Legacy Offshore Vehicle's adjusted tax basis in such asset at the time of contribution under IRC § 723, and (ii) the Master Fund LP's holding period in each contributed asset includes the contributing Legacy Offshore Vehicle's holding period under IRC § 1223(2), thereby preserving long-term capital gain treatment for all assets with holding periods exceeding one year as of the date of contribution.

Aggregate Values. The total fair market value ("FMV") of assets to be contributed across all four Legacy Offshore Vehicles in Steps 2 through 4 is approximately $7.75 billion. The total aggregate adjusted tax basis in such assets is approximately $6.03 billion. The total aggregate built-in gain is approximately $1.72 billion. These figures are based on preliminary valuations provided by Redstone Advisory Group LLC and tax-basis records furnished by Caldwell Pierce & Co. LLP, and are subject to final confirmation as discussed in Section IX.C below.

Companion Memoranda. This memorandum is one of several interconnected memoranda prepared in connection with the Reorganization. The following companion memoranda address issues that are related to, but distinct from, the core § 721(a) analysis set forth herein:

• IRC § 721(b) Investment Company Exception (tax-memo-section-721b-investment-company.docx);

• IRC § 367 Inapplicability to Partnership-to-Partnership Transfers (tax-memo-section-367-inapplicability.docx);

• IRC § 752 Liability Shifting Analysis (tax-memo-section-752-liability-analysis.docx);

• IRC § 704(c) Built-In Gain Carryover and Remedial Allocation Method (tax-memo-section-704c-big-carryover.docx and tax-memo-section-704c-remedial-method.docx);

• IRC § 1446 Withholding Analysis (tax-memo-section-1446-withholding.docx);

• FIRPTA / IRC § 897 Analysis (tax-memo-firpta-section-897.docx); and

• Anti-Abuse and Step Transaction Doctrine Analysis (tax-memo-anti-abuse-step-transaction.docx).

PLR Request. This memorandum is prepared in connection with a 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 CC:PSI (Passthroughs & Special Industries). The PLR request is targeted for submission on August 15, 2025. The representations recommended for inclusion in the PLR request are set forth in Section VII of this memorandum.

II. Statement of Facts

A. Solara and Its Fund Platform

Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership formed on March 17, 2014, with its principal office located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. As of March 31, 2025, Solara manages approximately $14.7 billion in assets under management across its family of private equity fund vehicles.

Solara is managed by Solara Digital Infrastructure GP LLC (Employer Identification Number ("EIN") 82-4917365), a Delaware limited liability company that serves as the general partner of Solara and the general partner or managing entity of certain of its affiliated fund vehicles. The managing partner and founder of Solara Digital Infrastructure GP LLC is Viktor Raines.

Solara is a private equity sponsor focused on investments in digital infrastructure, including data centers, fiber-optic networks, and edge computing facilities, as well as enterprise software-as-a-service ("SaaS") platforms. Solara's investment strategy targets control and significant minority positions in operating companies within these sectors, with a typical hold period of four to seven years.

To accommodate the diverse tax and regulatory profiles of its global investor base, Solara operates through six parallel fund vehicles organized across three jurisdictions: the State of Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg. This multi-vehicle structure serves to separate U.S. taxable investors, U.S. tax-exempt investors (including pension funds and university endowments), and non-U.S. investors (including sovereign wealth funds and non-U.S. insurance companies) into distinct investment pools with tailored tax and regulatory treatment.

B. Existing Fund Vehicles Subject to the Reorganization

The Reorganization involves two fund complexes — the Fund IV Complex (Vintage 2021) and the Fund V Complex (Vintage 2023) — each of which comprises a domestic Delaware fund vehicle and two offshore fund vehicles (one in the Cayman Islands and one in Luxembourg). The domestic Delaware fund vehicles in each complex (Fund IV LP and Fund V LP) are not contributing assets to the Master Fund and will continue to operate as co-investment vehicles alongside the Master Fund following the Reorganization. Only the four Legacy Offshore Vehicles are contributing assets to the Master Fund.

1. Fund IV Complex (Vintage 2021; Final Close June 15, 2021)

Solara Digital Partners Fund IV LP (EIN 85-2103748) is a Delaware limited partnership with a fund size of $4.2 billion, of which approximately 72% has been deployed as of the date hereof. Its general partner is Solara Digital Infrastructure GP LLC. U.S. taxable investors invest directly in Fund IV LP. Fund IV LP is not contributing assets to the Master Fund; it will co-invest alongside the Master Fund following the Reorganization and accordingly is referenced in this memorandum solely for context.

Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman") (EIN 98-6241503) is a Cayman Islands exempted limited partnership with its registered office at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111. Fund IV-A Cayman is registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Fund IV-A Cayman has a fund size of $1.85 billion. Its general partner is Solara Offshore GP Ltd., a Cayman Islands exempted company. Fund IV-A Cayman holds portfolio company investments on behalf of non-U.S. investors and U.S. tax-exempt investors. Fund IV-A Cayman is classified as a partnership for U.S. federal income tax purposes under the entity classification rules of Treasury Regulations § 301.7701-3.

Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux") (EIN 98-6241571) is a Luxembourg société en commandite spéciale organized under the Luxembourg law of July 12, 2013 on alternative investment fund managers. Fund IV-B Lux has its registered office at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, and is registered with the Luxembourg Registre de Commerce et des Sociétés ("RCS") under number B 248193. Fund IV-B Lux has a fund size of €1.15 billion (approximately $1.24 billion at the 1.08 EUR/USD exchange rate used uniformly throughout this memorandum). Its general partner (gérant commandité) is Solara Luxembourg Management S.à r.l. (RCS B 248194). Fund IV-B Lux holds portfolio company investments primarily for non-U.S. investors with European treaty access requirements and regulatory preferences. Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.

2. Fund V Complex (Vintage 2023; Final Close September 30, 2023)

Solara Digital Partners Fund V LP (EIN 88-3467219) is a Delaware limited partnership with a fund size of $5.6 billion, of which approximately 38% has been deployed as of the date hereof. Its general partner is Solara Digital Infrastructure GP LLC. U.S. taxable investors invest directly in Fund V LP. Fund V LP is not contributing assets to the Master Fund; it will co-invest alongside the Master Fund following the Reorganization.

Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman") (EIN 98-7891234) is a Cayman Islands exempted limited partnership with its registered office at Harborstone Corporate Services Ltd., George Town, Grand Cayman. Fund V-A Cayman is registered with CIMA under registration number MF-89103. Fund V-A Cayman has a fund size of $2.45 billion. Fund V-A Cayman is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.

Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux") (EIN 98-7891267) is a Luxembourg société en commandite spéciale with its registered office at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg. Fund V-B Lux is registered with the RCS under number B 271056. Fund V-B Lux has a fund size of €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.

C. Key Limited Partners (Representative)

The limited partner base of the Fund IV and Fund V complexes is diverse and includes U.S. public pension funds, U.S. tax-exempt endowments, non-U.S. sovereign wealth funds, non-U.S. insurance companies, and U.S. taxable family offices. The following limited partners are identified as representative for purposes of this memorandum and the PLR request:

Pinnacle State Employees' Retirement System is a U.S. public pension fund exempt from federal income tax under IRC § 115. Pinnacle has committed $275 million to Fund IV and $340 million to Fund V. The Chief Investment Officer of Pinnacle is Margaret Faulkner.

Grandview University Endowment is a U.S. tax-exempt endowment organized under the laws of the Commonwealth of Massachusetts and exempt from federal income tax under IRC § 501(c)(3). Grandview has committed $120 million to Fund IV and $185 million to Fund V. The Director of Investments of Grandview is Harold Kingsley.

Nordhaven Sovereign Wealth Fund is a non-U.S. sovereign wealth fund established by the Kingdom of Nordhaven. Nordhaven has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman. The Head of Alternative Investments for Nordhaven is Anders Bjørkman. Nordhaven is separately represented in connection with the Reorganization by Bramhall & Quelwick LLP, with Jason Tremaine as lead partner on international tax matters.

Kestrel Pacific Insurance Group is a non-U.S. insurance company organized under the laws of the Republic of Singapore. Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux. The Senior Portfolio Manager for Kestrel Pacific is Christine Leung.

Argyle Family Office Holdings LLC is a U.S. taxable family office organized as a Delaware limited liability company. Argyle has committed $95 million to Fund IV and $130 million to Fund V. The Principal of Argyle is Elliot Argyle.

D. Newly Formed Entities (Post-Reorganization)

As part of the Reorganization, the following new entities will be formed to establish a consolidated master-feeder fund structure:

Solara Consolidated Master Fund GP LLC ("Master Fund GP") is a Delaware limited liability company to be formed on or about September 15, 2025. Master Fund GP will serve as the sole general partner of the Master Fund. Master Fund GP will be managed by Solara Digital Infrastructure GP LLC (the existing management entity) and will have its registered agent at Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.

Solara Consolidated Master Fund LP ("Master Fund" or "Master Fund LP") is a Delaware limited partnership to be formed on or about September 15, 2025. The Master Fund will receive all portfolio assets from the four Legacy Offshore Vehicles in Steps 2 through 4 of the Reorganization. A Form 8832 check-the-box election classifying the Master Fund as a partnership for U.S. federal income tax purposes will be filed with the IRS effective as of September 15, 2025. The Master Fund will have its registered agent at Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.

Solara International Feeder (Cayman) LP ("International Feeder") is a Cayman Islands exempted limited partnership to be formed in connection with the Reorganization. The International Feeder will serve as the feeder vehicle for non-U.S. investors investing into the Master Fund. A Form 8832 check-the-box election classifying the International Feeder as a partnership for U.S. federal income tax purposes will be filed with the IRS.

Solara Tax-Exempt Feeder (Cayman) LP ("TE Feeder") is a Cayman Islands exempted limited partnership to be formed in connection with the Reorganization. The TE Feeder will serve as the feeder vehicle for U.S. tax-exempt investors (including pension funds and university endowments) in order to mitigate unrelated business taxable income ("UBTI") concerns under IRC §§ 511–514. A Form 8832 check-the-box election classifying the TE Feeder as a partnership for U.S. federal income tax purposes will be filed with the IRS.

E. The Proposed Multi-Step Reorganization

Overview. The Reorganization consists of five integrated steps planned for execution in Q4 2025, with a target effective date for the final step of December 1, 2025. The objective of the Reorganization is to consolidate the portfolio assets held by the four Legacy Offshore Vehicles into the Master Fund LP, establish a master-feeder structure to accommodate the existing investor base, and ultimately dissolve the Legacy Offshore Vehicles.

The general partner of Solara approved the exploration of the Reorganization on March 14, 2025. A meeting of the Limited Partner Advisory Committee ("LPAC") was held on April 22, 2025, at which preliminary LP consent was obtained from limited partners representing approximately 78% in interest of the aggregate capital commitments across all fund vehicles.

The five steps of the Reorganization are described below. This memorandum analyzes Steps 2 through 4 under IRC § 721(a). Step 1 involves formation activities that do not raise substantive tax issues for purposes of this analysis. Step 5 is analyzed in a companion memorandum addressing distributions under IRC § 731.

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

Step 1 involves the formation of the four new entities described in Section II.D above: Master Fund GP LLC, Master Fund LP, International Feeder, and TE Feeder. In connection with the formation of each new entity, a Form 8832 (Entity Classification Election) will be filed with the IRS to elect partnership classification for U.S. federal income tax purposes. The formation of these entities and the filing of the entity classification elections do not themselves trigger the recognition of gain or loss and are not the subject of this memorandum's analysis.

Step 2 — Contribution of Fund IV-A Cayman Assets (Target: October 1, 2025)

In Step 2, Solara Digital Partners Fund IV-A (Cayman) LP contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed in Step 2 is $2.31 billion. The aggregate adjusted tax basis of such assets is $1.62 billion. The aggregate built-in gain inherent in the contributed assets is $690 million (i.e., $2.31 billion less $1.62 billion). It is intended that this contribution will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).

Step 3 — Contribution of Fund IV-B Luxembourg Assets (Target: October 15, 2025)

In Step 3, Solara Digital Partners Fund IV-B (Luxembourg) SCSp contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed in Step 3 is €1.07 billion, or approximately $1.16 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €782 million, or approximately $844.6 million. The aggregate built-in gain inherent in the contributed assets is €288 million, or approximately $311 million. It is intended that this contribution will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).

Step 4 — Contribution of Fund V Offshore Assets (Target: November 1, 2025)

Step 4 involves two simultaneous contributions by the Fund V Legacy Offshore Vehicles:

Fund V-A (Cayman) LP Contribution. Fund V-A (Cayman) LP contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed by Fund V-A Cayman is $2.89 billion. The aggregate adjusted tax basis of such assets is $2.34 billion. The aggregate built-in gain is $550 million.

Fund V-B (Luxembourg) SCSp Contribution. Fund V-B (Luxembourg) SCSp contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed by Fund V-B Lux is €1.29 billion, or approximately $1.39 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €1.14 billion, or approximately $1.23 billion. The aggregate built-in gain is €150 million, or approximately $162 million.

It is intended that each contribution in Step 4 will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).

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

Step 5 is not analyzed in this memorandum. Step 5 is addressed in the companion memorandum analyzing distributions under IRC § 731 (tax-memo-section-731-distribution-analysis.docx). In summary, Step 5 involves the dissolution of each of the four Legacy Offshore Vehicles and the distribution of the Master Fund LP interests held by each Legacy Offshore Vehicle to its existing limited partners. Following such dissolution, non-U.S. limited partners will roll into the International Feeder, and U.S. tax-exempt limited partners will roll into the TE Feeder.

F. Aggregate Financial Summary of Steps 2–4

The following table summarizes the aggregate financial impact of the contributions to be made in Steps 2 through 4 of the Reorganization:

The aggregate liabilities of $1.34 billion assumed by the Master Fund in connection with the contributions are analyzed separately in the companion § 752 memorandum. As discussed in Sections V.E.3 and V.F.2 of this memorandum and analyzed in detail in the companion § 752 memorandum, these liability shifts do not cause recognition of gain under IRC § 731 when analyzed under the netting rules of Treasury Regulations § 1.752-1(f).

G. Representative Portfolio Company Interests Being Contributed

The following table identifies representative portfolio company interests being contributed by the Legacy Offshore Vehicles to the Master Fund LP. A complete schedule of all 23 portfolio company interests, including asset-by-asset FMV, adjusted tax basis, and built-in gain, is set forth in Exhibit 1 to this memorandum (cross-referenced to PLR Exhibit D).

Only the interests held by the four Legacy Offshore Vehicles are being contributed to the Master Fund. Interests held directly by Fund IV LP and Fund V LP remain in those domestic vehicles and are not the subject of the contributions analyzed herein. Fund IV LP and Fund V LP will co-invest alongside the Master Fund following the Reorganization.

H. Business Rationale for the Reorganization

The Reorganization is motivated by several substantial business purposes, each of which independently supports the economic substance and independent significance of the proposed transactions:

Operational Cost Reduction. The current multi-vehicle offshore structure results in approximately $3.8 million per year in duplicative administration, audit, and regulatory compliance fees across the Cayman Islands and Luxembourg entities. Consolidating the portfolio assets into a single Master Fund LP vehicle will eliminate these duplicative costs while maintaining appropriate investor segregation through the feeder structure.

OECD Pillar Two GloBE Rules. The Organization for Economic Co-operation and Development's ("OECD") Pillar Two Global Anti-Base Erosion ("GloBE") rules became effective for Solara's Luxembourg entities beginning in fiscal year 2025. These rules impose a global minimum effective tax rate of 15% and have substantially diminished the tax benefits historically associated with the Luxembourg SCSp structures. The Reorganization responds to this change in the international tax landscape by consolidating the Luxembourg vehicle holdings into a Delaware-based master fund, where the structural rationale is driven by operational efficiency and investor governance rather than by international tax arbitrage.

FATCA and CRS Compliance Simplification. The Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS") impose significant reporting obligations on foreign financial institutions and investment entities. By consolidating the offshore vehicles into a single master fund with feeder vehicles, the compliance burden is simplified, and the risk of reporting errors or penalties is reduced.

LP-Requested Governance Simplification. Multiple limited partners, including representatives of the LPAC and counsel to Nordhaven Sovereign Wealth Fund, have requested streamlined governance and reporting structures. The current multi-vehicle structure requires separate financial statements, separate K-1s, and separate investor communications for each vehicle. The consolidated master-feeder structure will enable unified reporting and simplified LP governance.

We note that the business rationale for the Reorganization is relevant to the analysis of independent economic substance and business purpose under the step transaction doctrine and the anti-abuse rules. This analysis is addressed in greater detail in the companion anti-abuse and step transaction doctrine memorandum (tax-memo-anti-abuse-step-transaction.docx).

I. Third-Party Advisors and Counsel

The following third-party advisors and counsel are engaged in connection with the Reorganization and the PLR request:

Calderwood & Harkness LLP (this firm) serves as U.S. tax counsel to Solara and is responsible for preparing and submitting the PLR request to the IRS. Lead associate Robert Jansen and working associate Garrett Simmons, under the supervision of responsible partner Leonard Cross and billing partner Sylvia Hartwell, are conducting the legal analysis set forth in this memorandum and the companion memoranda.

Caldwell Pierce & Co. LLP (Helen Okamoto, Partner) is the independent accounting firm retained to provide financial data, tax-basis records, and capital account schedules for each of the Legacy Offshore Vehicles and their portfolio company investments. The adjusted tax basis figures used in this memorandum are derived from records furnished by Caldwell Pierce, subject to final confirmation as noted in Section IX.C.

Redstone Advisory Group LLC (Marco DeLuca, Managing Director) is the independent valuation advisory firm retained to prepare fair market value appraisals of the portfolio company interests being contributed to the Master Fund. The FMV figures used in this memorandum are based on preliminary valuation estimates provided by Redstone, subject to final appraisal as noted in Section IX.C.

Meridian Offshore Legal (Fiona McAllister, Partner) serves as Cayman Islands counsel in connection with the formation and dissolution of Cayman Islands entities and regulatory matters relating to CIMA registration.

Veldhuis & Gérard S.à r.l. (Marc Gérard, Managing Partner) serves as Luxembourg counsel in connection with Luxembourg law matters, including the Luxembourg tax treatment of the SCSp-level transfers and compliance with Luxembourg corporate and regulatory law.

Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner) serves as independent counsel to the LPAC in connection with the Reorganization, including review of the consent process and LP advisory committee governance matters.

Bramhall & Quelwick LLP (Jason Tremaine, Partner) serves as independent tax counsel to Nordhaven Sovereign Wealth Fund in connection with investor-specific tax issues arising from the Reorganization, including sovereign immunity analysis and treaty-based positions.

III. Issues Presented

This memorandum addresses the following issues:

1. Whether the contributions of portfolio assets by Solara Digital Partners Fund IV-A (Cayman) LP to the Master Fund LP in Step 2 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by Fund IV-A Cayman or its partners.

2. Whether the contributions of portfolio assets by Solara Digital Partners Fund IV-B (Luxembourg) SCSp to the Master Fund LP in Step 3 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by Fund IV-B Lux or its partners.

3. Whether the contributions of portfolio assets by Solara Digital Partners Fund V-A (Cayman) LP and Solara Digital Partners Fund V-B (Luxembourg) SCSp to the Master Fund LP in Step 4 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by the contributing partnerships or their partners.

4. Whether the Master Fund LP takes a carryover basis in the contributed assets under IRC § 723.

5. Whether the contributing partnerships' holding periods in the contributed assets tack to the Master Fund LP under IRC § 1223(2).

6. Whether the aggregate liabilities assumed by the Master Fund LP in connection with the contributions affect the § 721(a) analysis, and the proper treatment of such liabilities under IRC § 752 (cross-reference to the companion § 752 memorandum).

IV. Short Answer / Conclusions

Based on our analysis of the applicable statutory provisions, Treasury Regulations, IRS guidance, and relevant case law, we reach the following conclusions:

First, all contributions of portfolio assets in Steps 2 through 4 of the Reorganization qualify as tax-free contributions of property to a partnership under IRC § 721(a). Each contribution satisfies the requirements of § 721(a) because each contributing Legacy Offshore Vehicle is transferring "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest in the Master Fund LP).

Second, no gain or loss is recognized by any contributing Legacy Offshore Vehicle upon the contribution of its portfolio assets to the Master Fund LP. Similarly, no gain or loss is recognized by any partner of any contributing Legacy Offshore Vehicle as a result of the contributions.

Third, the Master Fund LP takes a carryover basis in each contributed asset equal to the contributing Legacy Offshore Vehicle's adjusted tax basis in such asset at the time of contribution, as provided in IRC § 723. The aggregate carryover basis in all contributed assets is $6.03 billion.

Fourth, the Master Fund LP's holding period in each contributed asset includes the contributing Legacy Offshore Vehicle's holding period in such asset, as provided in IRC § 1223(2). Because all contributed assets have been held by the contributing Legacy Offshore Vehicles for more than one year as of the dates of contribution, long-term capital gain treatment is preserved on any subsequent disposition of such assets.

Fifth, the § 721(b) investment company exception does not apply to the contributions. The Master Fund LP does not constitute an "investment company" within the meaning of IRC § 351(e) because its portfolio consists of operating company interests in the digital infrastructure and enterprise SaaS sectors, not "stocks, securities, or other investment assets" within the meaning of Treasury Regulations § 1.351-1(c)(1)(ii). The detailed analysis of § 721(b) is set forth in the companion memorandum.

Sixth, the aggregate $1.34 billion in liabilities assumed by the Master Fund LP in connection with the contributions does not cause recognition of gain under IRC § 721(a) when read in conjunction with IRC § 752. The detailed liability analysis, including the application of the netting rules under Treasury Regulations § 1.752-1(f), is set forth in the companion § 752 memorandum. In summary, the netting analysis demonstrates that no contributing Legacy Offshore Vehicle experiences a net deemed distribution under IRC § 752(b) in excess of its outside basis in the Master Fund LP, and accordingly no gain is recognized under IRC § 731(a).

Seventh, IRC § 367 does not apply to the contributions because § 367(a) and § 367(b) govern transfers to or from corporations, and the Master Fund LP is classified as a partnership, not a corporation, for U.S. federal income tax purposes. The detailed analysis is set forth in the companion § 367 memorandum.

V. Discussion and Legal Analysis

A. General Rule of IRC § 721(a) — Nonrecognition on Contribution to Partnership

1. Statutory Text

Section 721(a) of the Internal Revenue Code provides the foundational nonrecognition rule for contributions of property to partnerships:

"No 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."

IRC § 721(a). The statute is broad in its application and reflects a deliberate Congressional choice to defer the recognition of gain or loss at the time a partner contributes property to a partnership. In plain terms, when a partner (or, as relevant here, a contributing partnership acting as a partner) transfers property to a partnership in exchange for a partnership interest, neither the transferor partner nor the transferee partnership recognizes gain or loss on the transfer. The built-in gain or loss inherent in the contributed property is preserved through the carryover basis mechanism of IRC § 723 and is allocated among the partners under IRC § 704(c) upon the partnership's subsequent disposition of the property (or through depreciation or amortization deductions attributable to the property).

The nonrecognition rule of § 721(a) is the partnership analog of IRC § 351, which provides nonrecognition treatment for transfers of property to a corporation in exchange for stock. However, § 721(a) is notably broader than § 351 in several respects: it imposes no "control" requirement (cf. the 80% control test of § 351(a)), it applies regardless of the number of contributing partners, and it applies to contributions by any person — including individuals, corporations, trusts, estates, and other partnerships.

2. Policy Rationale

The nonrecognition treatment afforded by § 721(a) reflects the aggregate theory of partnerships under Subchapter K of the Code. Under the aggregate theory, a partnership is viewed not as a separate entity but as an aggregation of its partners' interests. A contribution of property to a partnership is therefore treated as a mere change in the form of ownership — the contributing partner continues to own an economic interest in the same underlying property, but now holds that interest through the partnership rather than directly. Because there is no fundamental change in the economic position of the contributing partner, there is no appropriate realization event to trigger the recognition of gain or loss.

It is important to emphasize that § 721(a) provides deferral, not exemption, from the recognition of gain or loss. The built-in gain or loss inherent in the contributed property at the time of contribution is preserved through three complementary mechanisms: (i) the carryover basis rule of IRC § 723, which ensures that the partnership takes the contributing partner's adjusted tax basis in the contributed property, rather than a fair-market-value basis; (ii) the holding period tacking rule of IRC § 1223(2), which preserves the contributing partner's holding period in the contributed property; and (iii) the § 704(c) allocation rules, which require the partnership to allocate income, gain, loss, and deduction with respect to contributed property so as to account for the difference between the property's FMV and its adjusted basis at the time of contribution. Together, these provisions ensure that the built-in gain or loss is recognized when the partnership ultimately disposes of the contributed property or when the contributing partner disposes of its partnership interest.

3. Scope — "Property"

The term "property" for purposes of § 721(a) is construed broadly and includes virtually any asset or interest that can be the subject of a contribution to a partnership. Treasury Regulations § 1.721-1(a) confirms that § 721(a) applies to contributions of property, including money, and that the term "property" encompasses partnership interests, corporate stock, real property, personal property, intangible assets, and interests in operating businesses.

The portfolio company interests held by the Legacy Offshore Vehicles — including interests in NovaBright Data Systems Inc. (a Delaware corporation operating data centers), Crestline Cloud Solutions LLC (a Delaware LLC operating a SaaS platform), Veridian Edge Computing Corp. (a Delaware corporation operating edge computing infrastructure), Thorngate Fiber Networks LP (a Delaware limited partnership operating fiber-optic networks), Helix SaaS Holdings Ltd. (a Cayman Islands exempted company serving as a SaaS holding company), and 18 other portfolio companies — constitute "property" within the meaning of IRC § 721(a). These interests include equity interests in both domestic and foreign entities, and include interests in corporations, limited liability companies, and limited partnerships. Each such interest is a capital asset in the hands of the contributing Legacy Offshore Vehicle and qualifies as "property" for § 721(a) purposes without limitation.

We note in particular that partnership interests contributed by one partnership to another partnership are "property" for purposes of § 721(a). See Treas. Reg. § 1.721-1(a). This principle is directly relevant to the contribution by Fund IV-A Cayman of its 100% limited partnership interest in Thorngate Fiber Networks LP (a Delaware limited partnership) to the Master Fund LP.

4. "In Exchange for an Interest in the Partnership"

Section 721(a) requires that the contribution of property be made "in exchange for an interest in the partnership." This requirement ensures that the nonrecognition rule applies only to bona fide contributions to a partnership in a partner capacity, and not to transfers that are more properly characterized as sales, loans, or service-related payments.

In the present case, each contributing Legacy Offshore Vehicle receives a limited partnership interest in the Master Fund LP in exchange for its contributed portfolio company interests. No contributing Legacy Offshore Vehicle receives money, marketable securities, or any form of consideration other than a limited partnership interest. The value of each contributing vehicle's limited partnership interest in the Master Fund LP is determined by reference to the FMV of the portfolio assets contributed by that vehicle, in accordance with the partnership agreement of the Master Fund LP. The exchange-for-interest requirement of § 721(a) is therefore satisfied in each instance.

B. Application to Step 2 — Fund IV-A Cayman Contribution (October 1, 2025)

1. Contributing Entity

The contributing entity in Step 2 is Solara Digital Partners Fund IV-A (Cayman) LP, a Cayman Islands exempted limited partnership classified as a partnership for U.S. federal income tax purposes (EIN 98-6241503). Fund IV-A Cayman has been treated as a partnership for U.S. federal income tax purposes since its inception. As a Cayman Islands exempted limited partnership with two or more members, Fund IV-A Cayman is an "eligible entity" under Treasury Regulations § 301.7701-3(a) and has a default classification as a partnership under Treasury Regulations § 301.7701-3(b)(2)(i) (entity with two or more members that is not per se classified as a corporation). No Form 8832 election to change this default classification has been filed, and Fund IV-A Cayman has consistently filed as a partnership on its annual information returns.

2. Receiving Entity

The receiving entity in Step 2 is Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed on or about September 15, 2025. The Master Fund LP will be classified as a partnership for U.S. federal income tax purposes pursuant to a Form 8832 check-the-box election filed with the IRS effective as of September 15, 2025. As a Delaware limited partnership with two or more members, the Master Fund LP is an eligible entity with a default classification as a partnership, and the Form 8832 election will confirm and memorialize this classification.

3. Assets Contributed

Fund IV-A Cayman will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:

(a) A 60% equity interest in NovaBright Data Systems Inc. (a Delaware corporation engaged in the ownership and operation of Tier IV data centers across the mid-Atlantic and southeastern United States). The FMV of Fund IV-A Cayman's 60% interest is $534 million (representing 60% of the total enterprise value of $890 million attributed to NovaBright). The adjusted tax basis of Fund IV-A Cayman's 60% interest is $312 million (representing 60% of the total basis of $520 million). The built-in gain attributable to Fund IV-A Cayman's contributed interest is $222 million. The remaining 40% interest in NovaBright is held by Fund IV LP (the domestic Delaware fund) and is not being contributed to the Master Fund.

(b) A 100% limited partnership interest in Thorngate Fiber Networks LP (a Delaware limited partnership engaged in the construction and operation of metropolitan and long-haul fiber-optic network infrastructure). The FMV of Fund IV-A Cayman's 100% interest is $670 million. The adjusted tax basis is $490 million. The built-in gain is $180 million.

(c) Interests in additional Fund IV portfolio companies held by Fund IV-A Cayman. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in detail in Exhibit 1 to this memorandum.

The aggregate FMV of all assets contributed by Fund IV-A Cayman in Step 2 is $2.31 billion. The aggregate adjusted tax basis of such assets is $1.62 billion. The aggregate built-in gain is $690 million.

4. Consideration Received

In exchange for the contribution of all of its portfolio company interests, Fund IV-A Cayman will receive a limited partnership interest in the Master Fund LP. The limited partnership interest will represent a percentage interest in the Master Fund LP determined by the ratio of the FMV of Fund IV-A Cayman's contributed assets to the aggregate FMV of all assets held by (and contributed to) the Master Fund LP as of the date of Fund IV-A Cayman's contribution. Fund IV-A Cayman will not receive money, marketable securities, or any other form of consideration in addition to its limited partnership interest.

5. Analysis. Section 721(a) applies to the contribution in Step 2 because each element of the statute is satisfied:

(a) Property. Fund IV-A Cayman is contributing "property" within the meaning of § 721(a). The portfolio company interests — including equity interests in a Delaware corporation (NovaBright), a Delaware limited partnership (Thorngate), and other entities — are each "property" as that term is construed under § 721(a) and Treasury Regulations § 1.721-1(a).

(b) To a partnership. The Master Fund LP is classified as a partnership for U.S. federal income tax purposes pursuant to its Form 8832 election and the default classification rules of Treasury Regulations § 301.7701-3.

(c) In exchange for an interest in the partnership. Fund IV-A Cayman receives a limited partnership interest in the Master Fund LP in exchange for its contributed assets. No other consideration is received.

Accordingly, no gain or loss is recognized by Fund IV-A Cayman upon the contribution. Moreover, no gain or loss is recognized by the partners of Fund IV-A Cayman — including the non-U.S. limited partners (such as Nordhaven Sovereign Wealth Fund) and U.S. tax-exempt limited partners (such as Pinnacle State Employees' Retirement System and Grandview University Endowment) who are indirect participants in the transaction through their limited partnership interests in Fund IV-A Cayman.

The transaction is a contribution, not a sale or exchange. Fund IV-A Cayman does not receive money, marketable securities, or any consideration other than a limited partnership interest. There is no component of the transaction that would warrant recharacterization as a sale or exchange under IRC § 707(a)(2)(B) or any other provision.

We note that Fund IV-A Cayman is a foreign partnership contributing assets to a domestic partnership. The question of whether IRC § 367 might apply to this transfer is addressed in the companion § 367 memorandum. In summary, § 367 does not alter the § 721(a) analysis because § 367 by its terms applies to transfers to corporations (§ 367(a)) and transfers from corporations (§ 367(b)), not to transfers to or from partnerships. The Master Fund LP is classified as a partnership, not a corporation, and accordingly § 367 is inapplicable.

C. Application to Step 3 — Fund IV-B Luxembourg Contribution (October 15, 2025)

1. Contributing Entity

The contributing entity in Step 3 is Solara Digital Partners Fund IV-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-6241571; RCS number B 248193). Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3. A Luxembourg SCSp is an "eligible entity" within the meaning of Treasury Regulations § 301.7701-3(a) — it is not included in the per se corporation list of Treasury Regulations § 301.7701-2(b)(8) — and, as an entity with two or more members, its default classification under Treasury Regulations § 301.7701-3(b)(2)(i) is as a partnership. No Form 8832 election to change this default classification has been filed, and Fund IV-B Lux has consistently been treated as a partnership for U.S. federal income tax purposes since its formation.

2. Receiving Entity

The receiving entity in Step 3 is the same as in Step 2: Solara Consolidated Master Fund LP, a Delaware limited partnership classified as a partnership for U.S. federal income tax purposes. At the time of the Step 3 contribution (October 15, 2025), the Master Fund LP will already hold the portfolio company interests contributed by Fund IV-A Cayman in Step 2 (October 1, 2025).

3. Assets Contributed

Fund IV-B Lux will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:

(a) A 100% equity interest in Crestline Cloud Solutions LLC (a Delaware limited liability company treated as a disregarded entity for U.S. federal income tax purposes, engaged in the development and licensing of a cloud-based enterprise SaaS platform for supply chain management). The FMV of Fund IV-B Lux's 100% interest in Crestline is €340 million ($367 million at the 1.08 EUR/USD exchange rate). The adjusted tax basis is €195 million ($211 million). The built-in gain is €145 million ($156 million).

(b) Interests in additional Fund IV portfolio companies held by Fund IV-B Lux. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in Exhibit 1.

The aggregate FMV of all assets contributed by Fund IV-B Lux in Step 3 is €1.07 billion, or approximately $1.16 billion at 1.08 EUR/USD. The aggregate adjusted tax basis is €782 million, or approximately $844.6 million. The aggregate built-in gain is €288 million, or approximately $311 million.

4. Currency Considerations

All amounts denominated in euros in connection with the Fund IV-B Lux and Fund V-B Lux contributions are converted to U.S. dollars at the 1.08 EUR/USD exchange rate, which is used uniformly throughout the Reorganization analysis. This exchange rate reflects the spot rate prevailing at the time of the preliminary valuation analysis and will be updated to reflect the actual spot rate on the date of each contribution for purposes of the final tax reporting.

Section 721(a) applies to the dollar-equivalent values of the contributed assets. No separate gain or loss under IRC § 988 arises in connection with the contribution of non-currency property (i.e., portfolio company interests) to the Master Fund LP. Section 988 gain or loss is relevant only to transactions involving "section 988 transactions" as defined in IRC § 988(c)(1), which generally include the disposition of nonfunctional currency, and is not triggered by the contribution of equity interests in operating companies.

5. Analysis. Section 721(a) applies to the contribution in Step 3 on the same basis as the analysis set forth in Section V.B.5 above with respect to Step 2. Fund IV-B Lux is contributing "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest in the Master Fund LP). Each element of § 721(a) is satisfied.

Accordingly, no gain or loss is recognized by Fund IV-B Lux upon the contribution. No gain or loss is recognized by the partners of Fund IV-B Lux, including Kestrel Pacific Insurance Group (a Singapore-based insurance company with €200 million committed to Fund IV-B Lux) and other non-U.S. investors.

The Luxembourg tax implications of the SCSp-level transfer — including the analysis under Article 3(2) of the Luxembourg law of July 12, 2013 regarding the absence of Luxembourg capital gains tax on SCSp-level transfers of partnership interests — are addressed in a companion Luxembourg tax memorandum prepared in coordination with Veldhuis & Gérard S.à r.l. (Marc Gérard, Managing Partner). Those Luxembourg tax implications do not affect the application of § 721(a) as a matter of U.S. federal income tax law.

The fact that Fund IV-B Lux is organized under Luxembourg law does not affect the application of § 721(a). For purposes of U.S. federal income tax law, the relevant inquiry is whether Fund IV-B Lux is classified as a partnership under Treasury Regulations § 301.7701-3 — which it is — and whether the contribution satisfies the statutory requirements of § 721(a) — which it does. The jurisdiction of organization of the contributing entity is not a factor in the § 721(a) analysis.

D. Application to Step 4 — Fund V Offshore Contributions (November 1, 2025)

1. Fund V-A Cayman Contribution

a. Contributing Entity. The contributing entity is Solara Digital Partners Fund V-A (Cayman) LP, a Cayman Islands exempted limited partnership classified as a partnership for U.S. federal income tax purposes (EIN 98-7891234; CIMA registration MF-89103). Fund V-A Cayman is an eligible entity under Treasury Regulations § 301.7701-3 with a default classification as a partnership.

b. Assets Contributed. Fund V-A Cayman will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:

(a) A 55% equity interest in Veridian Edge Computing Corp. (a Delaware corporation engaged in the deployment and operation of edge computing infrastructure across North America and Western Europe). The FMV of Fund V-A Cayman's 55% interest is $616 million (representing 55% of the total enterprise value of $1.12 billion attributed to Veridian). The adjusted tax basis of Fund V-A Cayman's 55% interest is $429 million (representing 55% of the total basis of $780 million). The built-in gain attributable to Fund V-A Cayman's contributed interest is $187 million. The remaining 45% interest in Veridian is held by Fund V LP (the domestic Delaware fund) and is not being contributed to the Master Fund.

(b) A 100% equity interest in Helix SaaS Holdings Ltd. (a Cayman Islands exempted company serving as a holding company for a portfolio of enterprise SaaS platforms focused on cybersecurity and identity management). The FMV of Fund V-A Cayman's 100% interest is $445 million. The adjusted tax basis is $310 million. The built-in gain is $135 million.

(c) Interests in additional Fund V portfolio companies held by Fund V-A Cayman. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in Exhibit 1.

The aggregate FMV of all assets contributed by Fund V-A Cayman in Step 4 is $2.89 billion. The aggregate adjusted tax basis of such assets is $2.34 billion. The aggregate built-in gain is $550 million.

c. Analysis. Section 721(a) applies to the contribution by Fund V-A Cayman in Step 4. The analysis is identical in all material respects to the analyses set forth in Sections V.B.5 and V.C.5 above with respect to Steps 2 and 3, respectively. Fund V-A Cayman is contributing "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest). No gain or loss is recognized by Fund V-A Cayman or its partners, including Nordhaven Sovereign Wealth Fund (with $500 million committed to Fund V-A Cayman).

2. Fund V-B Luxembourg Contribution

a. Contributing Entity. The contributing entity is Solara Digital Partners Fund V-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale classified as a partnership for U.S. federal income tax purposes (EIN 98-7891267; RCS number B 271056). The entity classification analysis for Fund V-B Lux is identical to the analysis set forth in Section V.C.1 above for Fund IV-B Lux.

b. Assets Contributed. Fund V-B Lux will contribute all of its portfolio company interests to the Master Fund LP. The aggregate FMV of all assets contributed by Fund V-B Lux is €1.29 billion, or approximately $1.39 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €1.14 billion, or approximately $1.23 billion. The aggregate built-in gain is €150 million, or approximately $162 million. The specific portfolio company interests contributed by Fund V-B Lux are identified in Exhibit 1.

c. Analysis. Section 721(a) applies to the contribution by Fund V-B Lux in Step 4 on the same basis as the analyses set forth above. Fund V-B Lux is contributing "property" to a "partnership" "in exchange for an interest in the partnership." No gain or loss is recognized by Fund V-B Lux or its partners, including Kestrel Pacific Insurance Group (with €275 million committed to Fund V-B Lux). The currency considerations discussed in Section V.C.4 above apply equally to the Fund V-B Lux contribution.

E. Partnership-to-Partnership Contributions Under § 721(a)

1. General Principles

A critical feature of the Reorganization is that each contributing entity is itself a partnership, and each contributing entity is contributing its assets to another partnership (the Master Fund LP). IRC § 721(a) applies equally to contributions by partnerships (acting as "partners") to other partnerships. There is no limitation in the statute or the Treasury Regulations that would restrict the application of § 721(a) to contributions by individuals or corporations. When a partnership contributes property to another partnership, the contributing partnership is treated as a "partner" making a contribution of "property" to the receiving partnership.

Treasury Regulations § 1.721-1(a) provides guidance on the scope of § 721(a), stating in relevant part that the nonrecognition rule applies to contributions of property to a partnership by a partner. The regulation further provides that "Section 721 shall not apply to a transaction between a partnership and a partner not acting in his capacity as a partner." This limitation is not implicated in the present case, because each Legacy Offshore Vehicle is acting in its capacity as a partner — specifically, as an incoming limited partner — of the Master Fund LP when it contributes its portfolio company interests in exchange for a limited partnership interest.

2. Tiered Partnership Considerations

Following the completion of Steps 2 through 4, the result will be a tiered partnership structure: each Legacy Offshore Vehicle (as an upper-tier partnership) will hold a limited partnership interest in the Master Fund LP (the lower-tier partnership). The Master Fund LP will hold the portfolio company interests directly. The existing limited partners of each Legacy Offshore Vehicle will remain limited partners of their respective Legacy Offshore Vehicle during this interim period.

This tiered structure is expressly contemplated by Subchapter K and does not impair the application of § 721(a) to the contributions. Tiered partnership structures are common in the private equity fund context and are well-established under the Code and Treasury Regulations.

We note that this tiered structure is temporary. In Step 5 of the Reorganization (targeted for December 1, 2025), each Legacy Offshore Vehicle will dissolve and distribute its limited partnership interest in the Master Fund LP to its existing limited partners. Following Step 5, the limited partners will hold their Master Fund LP interests directly (or through the International Feeder or TE Feeder, as applicable), and the Legacy Offshore Vehicles will cease to exist. The Step 5 distributions are analyzed under IRC § 731 in the companion memorandum.

During the interim period between Steps 2–4 and Step 5, the tiered partnership rules under Subchapter K will apply, including (i) the § 704(c) layering rules for built-in gain and loss tracking at both the upper-tier and lower-tier partnership levels, (ii) the § 752 tiered partnership liability allocation rules for determining each partner's share of partnership liabilities, and (iii) the reporting and withholding obligations applicable to tiered partnership structures under IRC §§ 1446 and 6031. These interim-period issues are noted here for completeness but are not the primary focus of this memorandum.

3. Substance of the Transaction

The contributions in Steps 2 through 4 are bona fide contributions of property in exchange for partnership interests. The contributing partnerships are not acting as dealers, service providers, or disguised sellers in connection with the contributions. Each contributing Legacy Offshore Vehicle is contributing its entire portfolio of assets to the Master Fund LP in exchange for a limited partnership interest that reflects the FMV of the contributed assets. There is no retained interest, no side payment, no guarantee, and no other arrangement that would suggest a transaction other than a straightforward contribution.

There is no disguised sale concern under IRC § 707(a)(2)(B) because the contributing partnerships do not receive money or other property in addition to their partnership interests. No "boot" is paid to any contributing partnership. The two-year presumption under Treasury Regulations § 1.707-3(c), which creates a rebuttable presumption that a transfer of property to a partnership and a related transfer of money or other property from the partnership to the partner constitute a disguised sale, is not triggered because no distributions of money or other consideration are made (or planned to be made) to the contributing partnerships within two years of the contributions, other than the Step 5 dissolution distributions. The Step 5 dissolution distributions are not distributions "related to" the contributions within the meaning of Treasury Regulations § 1.707-3 because they represent the liquidation of the Legacy Offshore Vehicles as part of the integrated reorganization plan, not a return of consideration for the contributed assets.

We also note that the $1.34 billion in aggregate liabilities assumed by the Master Fund LP in connection with the contributions is analyzed under IRC § 752 in the companion memorandum. To the extent that liability shifts between the contributing Legacy Offshore Vehicles and the Master Fund LP create deemed distributions under IRC § 752(b), those deemed distributions are analyzed for potential gain recognition under IRC § 731 in the companion § 752 memorandum. As summarized in Section IV above, the netting analysis under Treasury Regulations § 1.752-1(f) demonstrates that no contributing Legacy Offshore Vehicle experiences a net deemed distribution in excess of its outside basis.

F. Exceptions to § 721(a) — Applicability Review

Although § 721(a) is a broadly applicable nonrecognition provision, the Code contains several exceptions and related provisions that could, in theory, override or limit the nonrecognition treatment. We address each potentially applicable exception below and conclude that none applies to the contributions in Steps 2 through 4 of the Reorganization.

1. Section 721(b) — Investment Company Exception

IRC § 721(b) provides that § 721(a) "shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment company (within the meaning of section 351(e)) if the partnership were incorporated." In other words, if the Master Fund LP, hypothetically treated as if it were a corporation, would be an "investment company" as defined in IRC § 351(e) and Treasury Regulations § 1.351-1(c)(1), then the nonrecognition rule of § 721(a) would not apply to any gain realized on the contributions.

The detailed analysis of the § 721(b) investment company exception is set forth in the companion memorandum (tax-memo-section-721b-investment-company.docx). We summarize the conclusion here: The Master Fund LP does not constitute an investment company within the meaning of IRC § 351(e) because its portfolio consists of operating company inter

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
TAX MEMORANDUM
CALDERWOOD & HARKNESS LLP 1900 K Street NW, Suite 1100 Washington, DC 20006
June 16, 2025
To: Leonard Cross, Responsible Partner, Tax Sylvia Hartwell, Billing Partner, Tax
From: Robert Jansen, Lead Associate, Tax Garrett Simmons, Working Associate, Tax
Re: IRC § 721(a) Contribution Analysis — Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization
Engagement Number: 20250527-SDILP-PLR
Client: Solara Digital Infrastructure LP
Right-click to update Table of Contents
I. Executive Summary
This memorandum analyzes the application of Section 721(a) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), to the contributions of portfolio assets by four Legacy Offshore Vehicles (as defined below) to the newly formed Solara Consolidated Master Fund LP (the "Master Fund" or "Master Fund LP") in Steps 2 through 4 of the proposed multi-step reorganization (the "Reorganization"). The four Legacy Offshore Vehicles contributing assets to the Master Fund are: (i) Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman"), (ii) Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux"), (iii) Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman"), and (iv) Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux," and together with Fund IV-A Cayman, Fund IV-B Lux, and Fund V-A Cayman, the "Legacy Offshore Vehicles").
Conclusion. Based on our analysis of the applicable statutory provisions, Treasury Regulations, and relevant authorities, we conclude that each contribution of portfolio assets in Steps 2 through 4 of the Reorganization qualifies as a tax-free contribution of property to a partnership under IRC § 721(a). Accordingly, no gain or loss is recognized by any contributing Legacy Offshore Vehicle, and no gain or loss is recognized by the partners of any contributing Legacy Offshore Vehicle, upon the completion of such contributions.
Ancillary Conclusions. We further conclude that (i) the Master Fund LP takes a carryover basis in each contributed asset equal to the contributing Legacy Offshore Vehicle's adjusted tax basis in such asset at the time of contribution under IRC § 723, and (ii) the Master Fund LP's holding period in each contributed asset includes the contributing Legacy Offshore Vehicle's holding period under IRC § 1223(2), thereby preserving long-term capital gain treatment for all assets with holding periods exceeding one year as of the date of contribution.
Aggregate Values. The total fair market value ("FMV") of assets to be contributed across all four Legacy Offshore Vehicles in Steps 2 through 4 is approximately $7.75 billion. The total aggregate adjusted tax basis in such assets is approximately $6.03 billion. The total aggregate built-in gain is approximately $1.72 billion. These figures are based on preliminary valuations provided by Redstone Advisory Group LLC and tax-basis records furnished by Caldwell Pierce & Co. LLP, and are subject to final confirmation as discussed in Section IX.C below.
Companion Memoranda. This memorandum is one of several interconnected memoranda prepared in connection with the Reorganization. The following companion memoranda address issues that are related to, but distinct from, the core § 721(a) analysis set forth herein:
•  IRC § 721(b) Investment Company Exception (tax-memo-section-721b-investment-company.docx);
•  IRC § 367 Inapplicability to Partnership-to-Partnership Transfers (tax-memo-section-367-inapplicability.docx);
•  IRC § 752 Liability Shifting Analysis (tax-memo-section-752-liability-analysis.docx);
•  IRC § 704(c) Built-In Gain Carryover and Remedial Allocation Method (tax-memo-section-704c-big-carryover.docx and tax-memo-section-704c-remedial-method.docx);
•  IRC § 1446 Withholding Analysis (tax-memo-section-1446-withholding.docx);
•  FIRPTA / IRC § 897 Analysis (tax-memo-firpta-section-897.docx); and
•  Anti-Abuse and Step Transaction Doctrine Analysis (tax-memo-anti-abuse-step-transaction.docx).
PLR Request. This memorandum is prepared in connection with a 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 CC:PSI (Passthroughs & Special Industries). The PLR request is targeted for submission on August 15, 2025. The representations recommended for inclusion in the PLR request are set forth in Section VII of this memorandum.
II. Statement of Facts
A. Solara and Its Fund Platform
Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership formed on March 17, 2014, with its principal office located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. As of March 31, 2025, Solara manages approximately $14.7 billion in assets under management across its family of private equity fund vehicles.
Solara is managed by Solara Digital Infrastructure GP LLC (Employer Identification Number ("EIN") 82-4917365), a Delaware limited liability company that serves as the general partner of Solara and the general partner or managing entity of certain of its affiliated fund vehicles. The managing partner and founder of Solara Digital Infrastructure GP LLC is Viktor Raines.
Solara is a private equity sponsor focused on investments in digital infrastructure, including data centers, fiber-optic networks, and edge computing facilities, as well as enterprise software-as-a-service ("SaaS") platforms. Solara's investment strategy targets control and significant minority positions in operating companies within these sectors, with a typical hold period of four to seven years.
To accommodate the diverse tax and regulatory profiles of its global investor base, Solara operates through six parallel fund vehicles organized across three jurisdictions: the State of Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg. This multi-vehicle structure serves to separate U.S. taxable investors, U.S. tax-exempt investors (including pension funds and university endowments), and non-U.S. investors (including sovereign wealth funds and non-U.S. insurance companies) into distinct investment pools with tailored tax and regulatory treatment.
B. Existing Fund Vehicles Subject to the Reorganization
The Reorganization involves two fund complexes — the Fund IV Complex (Vintage 2021) and the Fund V Complex (Vintage 2023) — each of which comprises a domestic Delaware fund vehicle and two offshore fund vehicles (one in the Cayman Islands and one in Luxembourg). The domestic Delaware fund vehicles in each complex (Fund IV LP and Fund V LP) are not contributing assets to the Master Fund and will continue to operate as co-investment vehicles alongside the Master Fund following the Reorganization. Only the four Legacy Offshore Vehicles are contributing assets to the Master Fund.
1. Fund IV Complex (Vintage 2021; Final Close June 15, 2021)
Solara Digital Partners Fund IV LP (EIN 85-2103748) is a Delaware limited partnership with a fund size of $4.2 billion, of which approximately 72% has been deployed as of the date hereof. Its general partner is Solara Digital Infrastructure GP LLC. U.S. taxable investors invest directly in Fund IV LP. Fund IV LP is not contributing assets to the Master Fund; it will co-invest alongside the Master Fund following the Reorganization and accordingly is referenced in this memorandum solely for context.
Solara Digital Partners Fund IV-A (Cayman) LP ("Fund IV-A Cayman") (EIN 98-6241503) is a Cayman Islands exempted limited partnership with its registered office at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111. Fund IV-A Cayman is registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Fund IV-A Cayman has a fund size of $1.85 billion. Its general partner is Solara Offshore GP Ltd., a Cayman Islands exempted company. Fund IV-A Cayman holds portfolio company investments on behalf of non-U.S. investors and U.S. tax-exempt investors. Fund IV-A Cayman is classified as a partnership for U.S. federal income tax purposes under the entity classification rules of Treasury Regulations § 301.7701-3.
Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux") (EIN 98-6241571) is a Luxembourg société en commandite spéciale organized under the Luxembourg law of July 12, 2013 on alternative investment fund managers. Fund IV-B Lux has its registered office at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, and is registered with the Luxembourg Registre de Commerce et des Sociétés ("RCS") under number B 248193. Fund IV-B Lux has a fund size of €1.15 billion (approximately $1.24 billion at the 1.08 EUR/USD exchange rate used uniformly throughout this memorandum). Its general partner (gérant commandité) is Solara Luxembourg Management S.à r.l. (RCS B 248194). Fund IV-B Lux holds portfolio company investments primarily for non-U.S. investors with European treaty access requirements and regulatory preferences. Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.
2. Fund V Complex (Vintage 2023; Final Close September 30, 2023)
Solara Digital Partners Fund V LP (EIN 88-3467219) is a Delaware limited partnership with a fund size of $5.6 billion, of which approximately 38% has been deployed as of the date hereof. Its general partner is Solara Digital Infrastructure GP LLC. U.S. taxable investors invest directly in Fund V LP. Fund V LP is not contributing assets to the Master Fund; it will co-invest alongside the Master Fund following the Reorganization.
Solara Digital Partners Fund V-A (Cayman) LP ("Fund V-A Cayman") (EIN 98-7891234) is a Cayman Islands exempted limited partnership with its registered office at Harborstone Corporate Services Ltd., George Town, Grand Cayman. Fund V-A Cayman is registered with CIMA under registration number MF-89103. Fund V-A Cayman has a fund size of $2.45 billion. Fund V-A Cayman is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.
Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux") (EIN 98-7891267) is a Luxembourg société en commandite spéciale with its registered office at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg. Fund V-B Lux is registered with the RCS under number B 271056. Fund V-B Lux has a fund size of €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD). Fund V-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3.
C. Key Limited Partners (Representative)
The limited partner base of the Fund IV and Fund V complexes is diverse and includes U.S. public pension funds, U.S. tax-exempt endowments, non-U.S. sovereign wealth funds, non-U.S. insurance companies, and U.S. taxable family offices. The following limited partners are identified as representative for purposes of this memorandum and the PLR request:
Pinnacle State Employees' Retirement System is a U.S. public pension fund exempt from federal income tax under IRC § 115. Pinnacle has committed $275 million to Fund IV and $340 million to Fund V. The Chief Investment Officer of Pinnacle is Margaret Faulkner.
Grandview University Endowment is a U.S. tax-exempt endowment organized under the laws of the Commonwealth of Massachusetts and exempt from federal income tax under IRC § 501(c)(3). Grandview has committed $120 million to Fund IV and $185 million to Fund V. The Director of Investments of Grandview is Harold Kingsley.
Nordhaven Sovereign Wealth Fund is a non-U.S. sovereign wealth fund established by the Kingdom of Nordhaven. Nordhaven has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman. The Head of Alternative Investments for Nordhaven is Anders Bjørkman. Nordhaven is separately represented in connection with the Reorganization by Bramhall & Quelwick LLP, with Jason Tremaine as lead partner on international tax matters.
Kestrel Pacific Insurance Group is a non-U.S. insurance company organized under the laws of the Republic of Singapore. Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux. The Senior Portfolio Manager for Kestrel Pacific is Christine Leung.
Argyle Family Office Holdings LLC is a U.S. taxable family office organized as a Delaware limited liability company. Argyle has committed $95 million to Fund IV and $130 million to Fund V. The Principal of Argyle is Elliot Argyle.
D. Newly Formed Entities (Post-Reorganization)
As part of the Reorganization, the following new entities will be formed to establish a consolidated master-feeder fund structure:
Solara Consolidated Master Fund GP LLC ("Master Fund GP") is a Delaware limited liability company to be formed on or about September 15, 2025. Master Fund GP will serve as the sole general partner of the Master Fund. Master Fund GP will be managed by Solara Digital Infrastructure GP LLC (the existing management entity) and will have its registered agent at Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.
Solara Consolidated Master Fund LP ("Master Fund" or "Master Fund LP") is a Delaware limited partnership to be formed on or about September 15, 2025. The Master Fund will receive all portfolio assets from the four Legacy Offshore Vehicles in Steps 2 through 4 of the Reorganization. A Form 8832 check-the-box election classifying the Master Fund as a partnership for U.S. federal income tax purposes will be filed with the IRS effective as of September 15, 2025. The Master Fund will have its registered agent at Capitol Registered Agents Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.
Solara International Feeder (Cayman) LP ("International Feeder") is a Cayman Islands exempted limited partnership to be formed in connection with the Reorganization. The International Feeder will serve as the feeder vehicle for non-U.S. investors investing into the Master Fund. A Form 8832 check-the-box election classifying the International Feeder as a partnership for U.S. federal income tax purposes will be filed with the IRS.
Solara Tax-Exempt Feeder (Cayman) LP ("TE Feeder") is a Cayman Islands exempted limited partnership to be formed in connection with the Reorganization. The TE Feeder will serve as the feeder vehicle for U.S. tax-exempt investors (including pension funds and university endowments) in order to mitigate unrelated business taxable income ("UBTI") concerns under IRC §§ 511–514. A Form 8832 check-the-box election classifying the TE Feeder as a partnership for U.S. federal income tax purposes will be filed with the IRS.
E. The Proposed Multi-Step Reorganization
Overview. The Reorganization consists of five integrated steps planned for execution in Q4 2025, with a target effective date for the final step of December 1, 2025. The objective of the Reorganization is to consolidate the portfolio assets held by the four Legacy Offshore Vehicles into the Master Fund LP, establish a master-feeder structure to accommodate the existing investor base, and ultimately dissolve the Legacy Offshore Vehicles.
The general partner of Solara approved the exploration of the Reorganization on March 14, 2025. A meeting of the Limited Partner Advisory Committee ("LPAC") was held on April 22, 2025, at which preliminary LP consent was obtained from limited partners representing approximately 78% in interest of the aggregate capital commitments across all fund vehicles.
The five steps of the Reorganization are described below. This memorandum analyzes Steps 2 through 4 under IRC § 721(a). Step 1 involves formation activities that do not raise substantive tax issues for purposes of this analysis. Step 5 is analyzed in a companion memorandum addressing distributions under IRC § 731.
Step 1 — Formation of New Entities (Target: September 15, 2025)
Step 1 involves the formation of the four new entities described in Section II.D above: Master Fund GP LLC, Master Fund LP, International Feeder, and TE Feeder. In connection with the formation of each new entity, a Form 8832 (Entity Classification Election) will be filed with the IRS to elect partnership classification for U.S. federal income tax purposes. The formation of these entities and the filing of the entity classification elections do not themselves trigger the recognition of gain or loss and are not the subject of this memorandum's analysis.
Step 2 — Contribution of Fund IV-A Cayman Assets (Target: October 1, 2025)
In Step 2, Solara Digital Partners Fund IV-A (Cayman) LP contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed in Step 2 is $2.31 billion. The aggregate adjusted tax basis of such assets is $1.62 billion. The aggregate built-in gain inherent in the contributed assets is $690 million (i.e., $2.31 billion less $1.62 billion). It is intended that this contribution will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).
Step 3 — Contribution of Fund IV-B Luxembourg Assets (Target: October 15, 2025)
In Step 3, Solara Digital Partners Fund IV-B (Luxembourg) SCSp contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed in Step 3 is €1.07 billion, or approximately $1.16 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €782 million, or approximately $844.6 million. The aggregate built-in gain inherent in the contributed assets is €288 million, or approximately $311 million. It is intended that this contribution will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).
Step 4 — Contribution of Fund V Offshore Assets (Target: November 1, 2025)
Step 4 involves two simultaneous contributions by the Fund V Legacy Offshore Vehicles:
Fund V-A (Cayman) LP Contribution. Fund V-A (Cayman) LP contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed by Fund V-A Cayman is $2.89 billion. The aggregate adjusted tax basis of such assets is $2.34 billion. The aggregate built-in gain is $550 million.
Fund V-B (Luxembourg) SCSp Contribution. Fund V-B (Luxembourg) SCSp contributes all of its portfolio company interests to the Master Fund LP in exchange for a limited partnership interest in the Master Fund LP. The aggregate FMV of the assets contributed by Fund V-B Lux is €1.29 billion, or approximately $1.39 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €1.14 billion, or approximately $1.23 billion. The aggregate built-in gain is €150 million, or approximately $162 million.
It is intended that each contribution in Step 4 will be treated as a tax-free contribution of property to a partnership under IRC § 721(a).
Step 5 — Dissolution and LP Migration (Target: December 1, 2025)
Step 5 is not analyzed in this memorandum. Step 5 is addressed in the companion memorandum analyzing distributions under IRC § 731 (tax-memo-section-731-distribution-analysis.docx). In summary, Step 5 involves the dissolution of each of the four Legacy Offshore Vehicles and the distribution of the Master Fund LP interests held by each Legacy Offshore Vehicle to its existing limited partners. Following such dissolution, non-U.S. limited partners will roll into the International Feeder, and U.S. tax-exempt limited partners will roll into the TE Feeder.
F. Aggregate Financial Summary of Steps 2–4
The following table summarizes the aggregate financial impact of the contributions to be made in Steps 2 through 4 of the Reorganization:
The aggregate liabilities of $1.34 billion assumed by the Master Fund in connection with the contributions are analyzed separately in the companion § 752 memorandum. As discussed in Sections V.E.3 and V.F.2 of this memorandum and analyzed in detail in the companion § 752 memorandum, these liability shifts do not cause recognition of gain under IRC § 731 when analyzed under the netting rules of Treasury Regulations § 1.752-1(f).
G. Representative Portfolio Company Interests Being Contributed
The following table identifies representative portfolio company interests being contributed by the Legacy Offshore Vehicles to the Master Fund LP. A complete schedule of all 23 portfolio company interests, including asset-by-asset FMV, adjusted tax basis, and built-in gain, is set forth in Exhibit 1 to this memorandum (cross-referenced to PLR Exhibit D).
Only the interests held by the four Legacy Offshore Vehicles are being contributed to the Master Fund. Interests held directly by Fund IV LP and Fund V LP remain in those domestic vehicles and are not the subject of the contributions analyzed herein. Fund IV LP and Fund V LP will co-invest alongside the Master Fund following the Reorganization.
H. Business Rationale for the Reorganization
The Reorganization is motivated by several substantial business purposes, each of which independently supports the economic substance and independent significance of the proposed transactions:
Operational Cost Reduction. The current multi-vehicle offshore structure results in approximately $3.8 million per year in duplicative administration, audit, and regulatory compliance fees across the Cayman Islands and Luxembourg entities. Consolidating the portfolio assets into a single Master Fund LP vehicle will eliminate these duplicative costs while maintaining appropriate investor segregation through the feeder structure.
OECD Pillar Two GloBE Rules. The Organization for Economic Co-operation and Development's ("OECD") Pillar Two Global Anti-Base Erosion ("GloBE") rules became effective for Solara's Luxembourg entities beginning in fiscal year 2025. These rules impose a global minimum effective tax rate of 15% and have substantially diminished the tax benefits historically associated with the Luxembourg SCSp structures. The Reorganization responds to this change in the international tax landscape by consolidating the Luxembourg vehicle holdings into a Delaware-based master fund, where the structural rationale is driven by operational efficiency and investor governance rather than by international tax arbitrage.
FATCA and CRS Compliance Simplification. The Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS") impose significant reporting obligations on foreign financial institutions and investment entities. By consolidating the offshore vehicles into a single master fund with feeder vehicles, the compliance burden is simplified, and the risk of reporting errors or penalties is reduced.
LP-Requested Governance Simplification. Multiple limited partners, including representatives of the LPAC and counsel to Nordhaven Sovereign Wealth Fund, have requested streamlined governance and reporting structures. The current multi-vehicle structure requires separate financial statements, separate K-1s, and separate investor communications for each vehicle. The consolidated master-feeder structure will enable unified reporting and simplified LP governance.
We note that the business rationale for the Reorganization is relevant to the analysis of independent economic substance and business purpose under the step transaction doctrine and the anti-abuse rules. This analysis is addressed in greater detail in the companion anti-abuse and step transaction doctrine memorandum (tax-memo-anti-abuse-step-transaction.docx).
I. Third-Party Advisors and Counsel
The following third-party advisors and counsel are engaged in connection with the Reorganization and the PLR request:
Calderwood & Harkness LLP (this firm) serves as U.S. tax counsel to Solara and is responsible for preparing and submitting the PLR request to the IRS. Lead associate Robert Jansen and working associate Garrett Simmons, under the supervision of responsible partner Leonard Cross and billing partner Sylvia Hartwell, are conducting the legal analysis set forth in this memorandum and the companion memoranda.
Caldwell Pierce & Co. LLP (Helen Okamoto, Partner) is the independent accounting firm retained to provide financial data, tax-basis records, and capital account schedules for each of the Legacy Offshore Vehicles and their portfolio company investments. The adjusted tax basis figures used in this memorandum are derived from records furnished by Caldwell Pierce, subject to final confirmation as noted in Section IX.C.
Redstone Advisory Group LLC (Marco DeLuca, Managing Director) is the independent valuation advisory firm retained to prepare fair market value appraisals of the portfolio company interests being contributed to the Master Fund. The FMV figures used in this memorandum are based on preliminary valuation estimates provided by Redstone, subject to final appraisal as noted in Section IX.C.
Meridian Offshore Legal (Fiona McAllister, Partner) serves as Cayman Islands counsel in connection with the formation and dissolution of Cayman Islands entities and regulatory matters relating to CIMA registration.
Veldhuis & Gérard S.à r.l. (Marc Gérard, Managing Partner) serves as Luxembourg counsel in connection with Luxembourg law matters, including the Luxembourg tax treatment of the SCSp-level transfers and compliance with Luxembourg corporate and regulatory law.
Whitfield, Carruthers & Doyle LLP (Diana Carruthers, Partner) serves as independent counsel to the LPAC in connection with the Reorganization, including review of the consent process and LP advisory committee governance matters.
Bramhall & Quelwick LLP (Jason Tremaine, Partner) serves as independent tax counsel to Nordhaven Sovereign Wealth Fund in connection with investor-specific tax issues arising from the Reorganization, including sovereign immunity analysis and treaty-based positions.
III. Issues Presented
This memorandum addresses the following issues:
1.  Whether the contributions of portfolio assets by Solara Digital Partners Fund IV-A (Cayman) LP to the Master Fund LP in Step 2 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by Fund IV-A Cayman or its partners.
2.  Whether the contributions of portfolio assets by Solara Digital Partners Fund IV-B (Luxembourg) SCSp to the Master Fund LP in Step 3 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by Fund IV-B Lux or its partners.
3.  Whether the contributions of portfolio assets by Solara Digital Partners Fund V-A (Cayman) LP and Solara Digital Partners Fund V-B (Luxembourg) SCSp to the Master Fund LP in Step 4 of the Reorganization constitute tax-free contributions of property to a partnership under IRC § 721(a), such that no gain or loss is recognized by the contributing partnerships or their partners.
4.  Whether the Master Fund LP takes a carryover basis in the contributed assets under IRC § 723.
5.  Whether the contributing partnerships' holding periods in the contributed assets tack to the Master Fund LP under IRC § 1223(2).
6.  Whether the aggregate liabilities assumed by the Master Fund LP in connection with the contributions affect the § 721(a) analysis, and the proper treatment of such liabilities under IRC § 752 (cross-reference to the companion § 752 memorandum).
IV. Short Answer / Conclusions
Based on our analysis of the applicable statutory provisions, Treasury Regulations, IRS guidance, and relevant case law, we reach the following conclusions:
First, all contributions of portfolio assets in Steps 2 through 4 of the Reorganization qualify as tax-free contributions of property to a partnership under IRC § 721(a). Each contribution satisfies the requirements of § 721(a) because each contributing Legacy Offshore Vehicle is transferring "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest in the Master Fund LP).
Second, no gain or loss is recognized by any contributing Legacy Offshore Vehicle upon the contribution of its portfolio assets to the Master Fund LP. Similarly, no gain or loss is recognized by any partner of any contributing Legacy Offshore Vehicle as a result of the contributions.
Third, the Master Fund LP takes a carryover basis in each contributed asset equal to the contributing Legacy Offshore Vehicle's adjusted tax basis in such asset at the time of contribution, as provided in IRC § 723. The aggregate carryover basis in all contributed assets is $6.03 billion.
Fourth, the Master Fund LP's holding period in each contributed asset includes the contributing Legacy Offshore Vehicle's holding period in such asset, as provided in IRC § 1223(2). Because all contributed assets have been held by the contributing Legacy Offshore Vehicles for more than one year as of the dates of contribution, long-term capital gain treatment is preserved on any subsequent disposition of such assets.
Fifth, the § 721(b) investment company exception does not apply to the contributions. The Master Fund LP does not constitute an "investment company" within the meaning of IRC § 351(e) because its portfolio consists of operating company interests in the digital infrastructure and enterprise SaaS sectors, not "stocks, securities, or other investment assets" within the meaning of Treasury Regulations § 1.351-1(c)(1)(ii). The detailed analysis of § 721(b) is set forth in the companion memorandum.
Sixth, the aggregate $1.34 billion in liabilities assumed by the Master Fund LP in connection with the contributions does not cause recognition of gain under IRC § 721(a) when read in conjunction with IRC § 752. The detailed liability analysis, including the application of the netting rules under Treasury Regulations § 1.752-1(f), is set forth in the companion § 752 memorandum. In summary, the netting analysis demonstrates that no contributing Legacy Offshore Vehicle experiences a net deemed distribution under IRC § 752(b) in excess of its outside basis in the Master Fund LP, and accordingly no gain is recognized under IRC § 731(a).
Seventh, IRC § 367 does not apply to the contributions because § 367(a) and § 367(b) govern transfers to or from corporations, and the Master Fund LP is classified as a partnership, not a corporation, for U.S. federal income tax purposes. The detailed analysis is set forth in the companion § 367 memorandum.
V. Discussion and Legal Analysis
A. General Rule of IRC § 721(a) — Nonrecognition on Contribution to Partnership
1. Statutory Text
Section 721(a) of the Internal Revenue Code provides the foundational nonrecognition rule for contributions of property to partnerships:
"No 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."
IRC § 721(a). The statute is broad in its application and reflects a deliberate Congressional choice to defer the recognition of gain or loss at the time a partner contributes property to a partnership. In plain terms, when a partner (or, as relevant here, a contributing partnership acting as a partner) transfers property to a partnership in exchange for a partnership interest, neither the transferor partner nor the transferee partnership recognizes gain or loss on the transfer. The built-in gain or loss inherent in the contributed property is preserved through the carryover basis mechanism of IRC § 723 and is allocated among the partners under IRC § 704(c) upon the partnership's subsequent disposition of the property (or through depreciation or amortization deductions attributable to the property).
The nonrecognition rule of § 721(a) is the partnership analog of IRC § 351, which provides nonrecognition treatment for transfers of property to a corporation in exchange for stock. However, § 721(a) is notably broader than § 351 in several respects: it imposes no "control" requirement (cf. the 80% control test of § 351(a)), it applies regardless of the number of contributing partners, and it applies to contributions by any person — including individuals, corporations, trusts, estates, and other partnerships.
2. Policy Rationale
The nonrecognition treatment afforded by § 721(a) reflects the aggregate theory of partnerships under Subchapter K of the Code. Under the aggregate theory, a partnership is viewed not as a separate entity but as an aggregation of its partners' interests. A contribution of property to a partnership is therefore treated as a mere change in the form of ownership — the contributing partner continues to own an economic interest in the same underlying property, but now holds that interest through the partnership rather than directly. Because there is no fundamental change in the economic position of the contributing partner, there is no appropriate realization event to trigger the recognition of gain or loss.
It is important to emphasize that § 721(a) provides deferral, not exemption, from the recognition of gain or loss. The built-in gain or loss inherent in the contributed property at the time of contribution is preserved through three complementary mechanisms: (i) the carryover basis rule of IRC § 723, which ensures that the partnership takes the contributing partner's adjusted tax basis in the contributed property, rather than a fair-market-value basis; (ii) the holding period tacking rule of IRC § 1223(2), which preserves the contributing partner's holding period in the contributed property; and (iii) the § 704(c) allocation rules, which require the partnership to allocate income, gain, loss, and deduction with respect to contributed property so as to account for the difference between the property's FMV and its adjusted basis at the time of contribution. Together, these provisions ensure that the built-in gain or loss is recognized when the partnership ultimately disposes of the contributed property or when the contributing partner disposes of its partnership interest.
3. Scope — "Property"
The term "property" for purposes of § 721(a) is construed broadly and includes virtually any asset or interest that can be the subject of a contribution to a partnership. Treasury Regulations § 1.721-1(a) confirms that § 721(a) applies to contributions of property, including money, and that the term "property" encompasses partnership interests, corporate stock, real property, personal property, intangible assets, and interests in operating businesses.
The portfolio company interests held by the Legacy Offshore Vehicles — including interests in NovaBright Data Systems Inc. (a Delaware corporation operating data centers), Crestline Cloud Solutions LLC (a Delaware LLC operating a SaaS platform), Veridian Edge Computing Corp. (a Delaware corporation operating edge computing infrastructure), Thorngate Fiber Networks LP (a Delaware limited partnership operating fiber-optic networks), Helix SaaS Holdings Ltd. (a Cayman Islands exempted company serving as a SaaS holding company), and 18 other portfolio companies — constitute "property" within the meaning of IRC § 721(a). These interests include equity interests in both domestic and foreign entities, and include interests in corporations, limited liability companies, and limited partnerships. Each such interest is a capital asset in the hands of the contributing Legacy Offshore Vehicle and qualifies as "property" for § 721(a) purposes without limitation.
We note in particular that partnership interests contributed by one partnership to another partnership are "property" for purposes of § 721(a). See Treas. Reg. § 1.721-1(a). This principle is directly relevant to the contribution by Fund IV-A Cayman of its 100% limited partnership interest in Thorngate Fiber Networks LP (a Delaware limited partnership) to the Master Fund LP.
4. "In Exchange for an Interest in the Partnership"
Section 721(a) requires that the contribution of property be made "in exchange for an interest in the partnership." This requirement ensures that the nonrecognition rule applies only to bona fide contributions to a partnership in a partner capacity, and not to transfers that are more properly characterized as sales, loans, or service-related payments.
In the present case, each contributing Legacy Offshore Vehicle receives a limited partnership interest in the Master Fund LP in exchange for its contributed portfolio company interests. No contributing Legacy Offshore Vehicle receives money, marketable securities, or any form of consideration other than a limited partnership interest. The value of each contributing vehicle's limited partnership interest in the Master Fund LP is determined by reference to the FMV of the portfolio assets contributed by that vehicle, in accordance with the partnership agreement of the Master Fund LP. The exchange-for-interest requirement of § 721(a) is therefore satisfied in each instance.
B. Application to Step 2 — Fund IV-A Cayman Contribution (October 1, 2025)
1. Contributing Entity
The contributing entity in Step 2 is Solara Digital Partners Fund IV-A (Cayman) LP, a Cayman Islands exempted limited partnership classified as a partnership for U.S. federal income tax purposes (EIN 98-6241503). Fund IV-A Cayman has been treated as a partnership for U.S. federal income tax purposes since its inception. As a Cayman Islands exempted limited partnership with two or more members, Fund IV-A Cayman is an "eligible entity" under Treasury Regulations § 301.7701-3(a) and has a default classification as a partnership under Treasury Regulations § 301.7701-3(b)(2)(i) (entity with two or more members that is not per se classified as a corporation). No Form 8832 election to change this default classification has been filed, and Fund IV-A Cayman has consistently filed as a partnership on its annual information returns.
2. Receiving Entity
The receiving entity in Step 2 is Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed on or about September 15, 2025. The Master Fund LP will be classified as a partnership for U.S. federal income tax purposes pursuant to a Form 8832 check-the-box election filed with the IRS effective as of September 15, 2025. As a Delaware limited partnership with two or more members, the Master Fund LP is an eligible entity with a default classification as a partnership, and the Form 8832 election will confirm and memorialize this classification.
3. Assets Contributed
Fund IV-A Cayman will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:
(a) A 60% equity interest in NovaBright Data Systems Inc. (a Delaware corporation engaged in the ownership and operation of Tier IV data centers across the mid-Atlantic and southeastern United States). The FMV of Fund IV-A Cayman's 60% interest is $534 million (representing 60% of the total enterprise value of $890 million attributed to NovaBright). The adjusted tax basis of Fund IV-A Cayman's 60% interest is $312 million (representing 60% of the total basis of $520 million). The built-in gain attributable to Fund IV-A Cayman's contributed interest is $222 million. The remaining 40% interest in NovaBright is held by Fund IV LP (the domestic Delaware fund) and is not being contributed to the Master Fund.
(b) A 100% limited partnership interest in Thorngate Fiber Networks LP (a Delaware limited partnership engaged in the construction and operation of metropolitan and long-haul fiber-optic network infrastructure). The FMV of Fund IV-A Cayman's 100% interest is $670 million. The adjusted tax basis is $490 million. The built-in gain is $180 million.
(c) Interests in additional Fund IV portfolio companies held by Fund IV-A Cayman. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in detail in Exhibit 1 to this memorandum.
The aggregate FMV of all assets contributed by Fund IV-A Cayman in Step 2 is $2.31 billion. The aggregate adjusted tax basis of such assets is $1.62 billion. The aggregate built-in gain is $690 million.
4. Consideration Received
In exchange for the contribution of all of its portfolio company interests, Fund IV-A Cayman will receive a limited partnership interest in the Master Fund LP. The limited partnership interest will represent a percentage interest in the Master Fund LP determined by the ratio of the FMV of Fund IV-A Cayman's contributed assets to the aggregate FMV of all assets held by (and contributed to) the Master Fund LP as of the date of Fund IV-A Cayman's contribution. Fund IV-A Cayman will not receive money, marketable securities, or any other form of consideration in addition to its limited partnership interest.
5. Analysis.  Section 721(a) applies to the contribution in Step 2 because each element of the statute is satisfied:
(a) Property. Fund IV-A Cayman is contributing "property" within the meaning of § 721(a). The portfolio company interests — including equity interests in a Delaware corporation (NovaBright), a Delaware limited partnership (Thorngate), and other entities — are each "property" as that term is construed under § 721(a) and Treasury Regulations § 1.721-1(a).
(b) To a partnership. The Master Fund LP is classified as a partnership for U.S. federal income tax purposes pursuant to its Form 8832 election and the default classification rules of Treasury Regulations § 301.7701-3.
(c) In exchange for an interest in the partnership. Fund IV-A Cayman receives a limited partnership interest in the Master Fund LP in exchange for its contributed assets. No other consideration is received.
Accordingly, no gain or loss is recognized by Fund IV-A Cayman upon the contribution. Moreover, no gain or loss is recognized by the partners of Fund IV-A Cayman — including the non-U.S. limited partners (such as Nordhaven Sovereign Wealth Fund) and U.S. tax-exempt limited partners (such as Pinnacle State Employees' Retirement System and Grandview University Endowment) who are indirect participants in the transaction through their limited partnership interests in Fund IV-A Cayman.
The transaction is a contribution, not a sale or exchange. Fund IV-A Cayman does not receive money, marketable securities, or any consideration other than a limited partnership interest. There is no component of the transaction that would warrant recharacterization as a sale or exchange under IRC § 707(a)(2)(B) or any other provision.
We note that Fund IV-A Cayman is a foreign partnership contributing assets to a domestic partnership. The question of whether IRC § 367 might apply to this transfer is addressed in the companion § 367 memorandum. In summary, § 367 does not alter the § 721(a) analysis because § 367 by its terms applies to transfers to corporations (§ 367(a)) and transfers from corporations (§ 367(b)), not to transfers to or from partnerships. The Master Fund LP is classified as a partnership, not a corporation, and accordingly § 367 is inapplicable.
C. Application to Step 3 — Fund IV-B Luxembourg Contribution (October 15, 2025)
1. Contributing Entity
The contributing entity in Step 3 is Solara Digital Partners Fund IV-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale (EIN 98-6241571; RCS number B 248193). Fund IV-B Lux is classified as a partnership for U.S. federal income tax purposes under Treasury Regulations § 301.7701-3. A Luxembourg SCSp is an "eligible entity" within the meaning of Treasury Regulations § 301.7701-3(a) — it is not included in the per se corporation list of Treasury Regulations § 301.7701-2(b)(8) — and, as an entity with two or more members, its default classification under Treasury Regulations § 301.7701-3(b)(2)(i) is as a partnership. No Form 8832 election to change this default classification has been filed, and Fund IV-B Lux has consistently been treated as a partnership for U.S. federal income tax purposes since its formation.
2. Receiving Entity
The receiving entity in Step 3 is the same as in Step 2: Solara Consolidated Master Fund LP, a Delaware limited partnership classified as a partnership for U.S. federal income tax purposes. At the time of the Step 3 contribution (October 15, 2025), the Master Fund LP will already hold the portfolio company interests contributed by Fund IV-A Cayman in Step 2 (October 1, 2025).
3. Assets Contributed
Fund IV-B Lux will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:
(a) A 100% equity interest in Crestline Cloud Solutions LLC (a Delaware limited liability company treated as a disregarded entity for U.S. federal income tax purposes, engaged in the development and licensing of a cloud-based enterprise SaaS platform for supply chain management). The FMV of Fund IV-B Lux's 100% interest in Crestline is €340 million ($367 million at the 1.08 EUR/USD exchange rate). The adjusted tax basis is €195 million ($211 million). The built-in gain is €145 million ($156 million).
(b) Interests in additional Fund IV portfolio companies held by Fund IV-B Lux. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in Exhibit 1.
The aggregate FMV of all assets contributed by Fund IV-B Lux in Step 3 is €1.07 billion, or approximately $1.16 billion at 1.08 EUR/USD. The aggregate adjusted tax basis is €782 million, or approximately $844.6 million. The aggregate built-in gain is €288 million, or approximately $311 million.
4. Currency Considerations
All amounts denominated in euros in connection with the Fund IV-B Lux and Fund V-B Lux contributions are converted to U.S. dollars at the 1.08 EUR/USD exchange rate, which is used uniformly throughout the Reorganization analysis. This exchange rate reflects the spot rate prevailing at the time of the preliminary valuation analysis and will be updated to reflect the actual spot rate on the date of each contribution for purposes of the final tax reporting.
Section 721(a) applies to the dollar-equivalent values of the contributed assets. No separate gain or loss under IRC § 988 arises in connection with the contribution of non-currency property (i.e., portfolio company interests) to the Master Fund LP. Section 988 gain or loss is relevant only to transactions involving "section 988 transactions" as defined in IRC § 988(c)(1), which generally include the disposition of nonfunctional currency, and is not triggered by the contribution of equity interests in operating companies.
5. Analysis.  Section 721(a) applies to the contribution in Step 3 on the same basis as the analysis set forth in Section V.B.5 above with respect to Step 2. Fund IV-B Lux is contributing "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest in the Master Fund LP). Each element of § 721(a) is satisfied.
Accordingly, no gain or loss is recognized by Fund IV-B Lux upon the contribution. No gain or loss is recognized by the partners of Fund IV-B Lux, including Kestrel Pacific Insurance Group (a Singapore-based insurance company with €200 million committed to Fund IV-B Lux) and other non-U.S. investors.
The Luxembourg tax implications of the SCSp-level transfer — including the analysis under Article 3(2) of the Luxembourg law of July 12, 2013 regarding the absence of Luxembourg capital gains tax on SCSp-level transfers of partnership interests — are addressed in a companion Luxembourg tax memorandum prepared in coordination with Veldhuis & Gérard S.à r.l. (Marc Gérard, Managing Partner). Those Luxembourg tax implications do not affect the application of § 721(a) as a matter of U.S. federal income tax law.
The fact that Fund IV-B Lux is organized under Luxembourg law does not affect the application of § 721(a). For purposes of U.S. federal income tax law, the relevant inquiry is whether Fund IV-B Lux is classified as a partnership under Treasury Regulations § 301.7701-3 — which it is — and whether the contribution satisfies the statutory requirements of § 721(a) — which it does. The jurisdiction of organization of the contributing entity is not a factor in the § 721(a) analysis.
D. Application to Step 4 — Fund V Offshore Contributions (November 1, 2025)
1. Fund V-A Cayman Contribution
a. Contributing Entity.  The contributing entity is Solara Digital Partners Fund V-A (Cayman) LP, a Cayman Islands exempted limited partnership classified as a partnership for U.S. federal income tax purposes (EIN 98-7891234; CIMA registration MF-89103). Fund V-A Cayman is an eligible entity under Treasury Regulations § 301.7701-3 with a default classification as a partnership.
b. Assets Contributed.  Fund V-A Cayman will contribute all of its portfolio company interests to the Master Fund LP. These assets include, but are not limited to, the following:
(a) A 55% equity interest in Veridian Edge Computing Corp. (a Delaware corporation engaged in the deployment and operation of edge computing infrastructure across North America and Western Europe). The FMV of Fund V-A Cayman's 55% interest is $616 million (representing 55% of the total enterprise value of $1.12 billion attributed to Veridian). The adjusted tax basis of Fund V-A Cayman's 55% interest is $429 million (representing 55% of the total basis of $780 million). The built-in gain attributable to Fund V-A Cayman's contributed interest is $187 million. The remaining 45% interest in Veridian is held by Fund V LP (the domestic Delaware fund) and is not being contributed to the Master Fund.
(b) A 100% equity interest in Helix SaaS Holdings Ltd. (a Cayman Islands exempted company serving as a holding company for a portfolio of enterprise SaaS platforms focused on cybersecurity and identity management). The FMV of Fund V-A Cayman's 100% interest is $445 million. The adjusted tax basis is $310 million. The built-in gain is $135 million.
(c) Interests in additional Fund V portfolio companies held by Fund V-A Cayman. The identities, FMVs, adjusted tax bases, and built-in gains of these additional portfolio companies are set forth in Exhibit 1.
The aggregate FMV of all assets contributed by Fund V-A Cayman in Step 4 is $2.89 billion. The aggregate adjusted tax basis of such assets is $2.34 billion. The aggregate built-in gain is $550 million.
c. Analysis.  Section 721(a) applies to the contribution by Fund V-A Cayman in Step 4. The analysis is identical in all material respects to the analyses set forth in Sections V.B.5 and V.C.5 above with respect to Steps 2 and 3, respectively. Fund V-A Cayman is contributing "property" (portfolio company interests) to a "partnership" (the Master Fund LP) "in exchange for an interest in the partnership" (a limited partnership interest). No gain or loss is recognized by Fund V-A Cayman or its partners, including Nordhaven Sovereign Wealth Fund (with $500 million committed to Fund V-A Cayman).
2. Fund V-B Luxembourg Contribution
a. Contributing Entity.  The contributing entity is Solara Digital Partners Fund V-B (Luxembourg) SCSp, a Luxembourg société en commandite spéciale classified as a partnership for U.S. federal income tax purposes (EIN 98-7891267; RCS number B 271056). The entity classification analysis for Fund V-B Lux is identical to the analysis set forth in Section V.C.1 above for Fund IV-B Lux.
b. Assets Contributed.  Fund V-B Lux will contribute all of its portfolio company interests to the Master Fund LP. The aggregate FMV of all assets contributed by Fund V-B Lux is €1.29 billion, or approximately $1.39 billion at the 1.08 EUR/USD exchange rate. The aggregate adjusted tax basis of such assets is €1.14 billion, or approximately $1.23 billion. The aggregate built-in gain is €150 million, or approximately $162 million. The specific portfolio company interests contributed by Fund V-B Lux are identified in Exhibit 1.
c. Analysis.  Section 721(a) applies to the contribution by Fund V-B Lux in Step 4 on the same basis as the analyses set forth above. Fund V-B Lux is contributing "property" to a "partnership" "in exchange for an interest in the partnership." No gain or loss is recognized by Fund V-B Lux or its partners, including Kestrel Pacific Insurance Group (with €275 million committed to Fund V-B Lux). The currency considerations discussed in Section V.C.4 above apply equally to the Fund V-B Lux contribution.
E. Partnership-to-Partnership Contributions Under § 721(a)
1. General Principles
A critical feature of the Reorganization is that each contributing entity is itself a partnership, and each contributing entity is contributing its assets to another partnership (the Master Fund LP). IRC § 721(a) applies equally to contributions by partnerships (acting as "partners") to other partnerships. There is no limitation in the statute or the Treasury Regulations that would restrict the application of § 721(a) to contributions by individuals or corporations. When a partnership contributes property to another partnership, the contributing partnership is treated as a "partner" making a contribution of "property" to the receiving partnership.
Treasury Regulations § 1.721-1(a) provides guidance on the scope of § 721(a), stating in relevant part that the nonrecognition rule applies to contributions of property to a partnership by a partner. The regulation further provides that "Section 721 shall not apply to a transaction between a partnership and a partner not acting in his capacity as a partner." This limitation is not implicated in the present case, because each Legacy Offshore Vehicle is acting in its capacity as a partner — specifically, as an incoming limited partner — of the Master Fund LP when it contributes its portfolio company interests in exchange for a limited partnership interest.
2. Tiered Partnership Considerations
Following the completion of Steps 2 through 4, the result will be a tiered partnership structure: each Legacy Offshore Vehicle (as an upper-tier partnership) will hold a limited partnership interest in the Master Fund LP (the lower-tier partnership). The Master Fund LP will hold the portfolio company interests directly. The existing limited partners of each Legacy Offshore Vehicle will remain limited partners of their respective Legacy Offshore Vehicle during this interim period.
This tiered structure is expressly contemplated by Subchapter K and does not impair the application of § 721(a) to the contributions. Tiered partnership structures are common in the private equity fund context and are well-established under the Code and Treasury Regulations.
We note that this tiered structure is temporary. In Step 5 of the Reorganization (targeted for December 1, 2025), each Legacy Offshore Vehicle will dissolve and distribute its limited partnership interest in the Master Fund LP to its existing limited partners. Following Step 5, the limited partners will hold their Master Fund LP interests directly (or through the International Feeder or TE Feeder, as applicable), and the Legacy Offshore Vehicles will cease to exist. The Step 5 distributions are analyzed under IRC § 731 in the companion memorandum.
During the interim period between Steps 2–4 and Step 5, the tiered partnership rules under Subchapter K will apply, including (i) the § 704(c) layering rules for built-in gain and loss tracking at both the upper-tier and lower-tier partnership levels, (ii) the § 752 tiered partnership liability allocation rules for determining each partner's share of partnership liabilities, and (iii) the reporting and withholding obligations applicable to tiered partnership structures under IRC §§ 1446 and 6031. These interim-period issues are noted here for completeness but are not the primary focus of this memorandum.
3. Substance of the Transaction
The contributions in Steps 2 through 4 are bona fide contributions of property in exchange for partnership interests. The contributing partnerships are not acting as dealers, service providers, or disguised sellers in connection with the contributions. Each contributing Legacy Offshore Vehicle is contributing its entire portfolio of assets to the Master Fund LP in exchange for a limited partnership interest that reflects the FMV of the contributed assets. There is no retained interest, no side payment, no guarantee, and no other arrangement that would suggest a transaction other than a straightforward contribution.
There is no disguised sale concern under IRC § 707(a)(2)(B) because the contributing partnerships do not receive money or other property in addition to their partnership interests. No "boot" is paid to any contributing partnership. The two-year presumption under Treasury Regulations § 1.707-3(c), which creates a rebuttable presumption that a transfer of property to a partnership and a related transfer of money or other property from the partnership to the partner constitute a disguised sale, is not triggered because no distributions of money or other consideration are made (or planned to be made) to the contributing partnerships within two years of the contributions, other than the Step 5 dissolution distributions. The Step 5 dissolution distributions are not distributions "related to" the contributions within the meaning of Treasury Regulations § 1.707-3 because they represent the liquidation of the Legacy Offshore Vehicles as part of the integrated reorganization plan, not a return of consideration for the contributed assets.
We also note that the $1.34 billion in aggregate liabilities assumed by the Master Fund LP in connection with the contributions is analyzed under IRC § 752 in the companion memorandum. To the extent that liability shifts between the contributing Legacy Offshore Vehicles and the Master Fund LP create deemed distributions under IRC § 752(b), those deemed distributions are analyzed for potential gain recognition under IRC § 731 in the companion § 752 memorandum. As summarized in Section IV above, the netting analysis under Treasury Regulations § 1.752-1(f) demonstrates that no contributing Legacy Offshore Vehicle experiences a net deemed distribution in excess of its outside basis.
F. Exceptions to § 721(a) — Applicability Review
Although § 721(a) is a broadly applicable nonrecognition provision, the Code contains several exceptions and related provisions that could, in theory, override or limit the nonrecognition treatment. We address each potentially applicable exception below and conclude that none applies to the contributions in Steps 2 through 4 of the Reorganization.
1. Section 721(b) — Investment Company Exception
IRC § 721(b) provides that § 721(a) "shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment company (within the meaning of section 351(e)) if the partnership were incorporated." In other words, if the Master Fund LP, hypothetically treated as if it were a corporation, would be an "investment company" as defined in IRC § 351(e) and Treasury Regulations § 1.351-1(c)(1), then the nonrecognition rule of § 721(a) would not apply to any gain realized on the contributions.
The detailed analysis of the § 721(b) investment company exception is set forth in the companion memorandum (tax-memo-section-721b-investment-company.docx). We summarize the conclusion here: The Master Fund LP does not constitute an investment company within the meaning of IRC § 351(e) because its portfolio consists of operating company inter

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