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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

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

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

DATE: June 16, 2025

RE: IRC § 731 Distribution Analysis — Step 5 of Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization

MATTER: Solara Digital Infrastructure LP — PLR Request

ENGAGEMENT NO.: 20250527-SDILP-PLR

CLIENT: Solara Digital Infrastructure LP

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I. EXECUTIVE SUMMARY

The purpose of this memorandum is to analyze the United States federal income tax consequences under Section 731 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), of Step 5 of the proposed five-step cross-border reorganization of the fund platform of Solara Digital Infrastructure LP ("Solara" or "SDILP"). This memorandum is one in a series of companion memoranda prepared by Calderwood & Harkness LLP in connection with the private letter ruling ("PLR") request that the firm intends to submit to the Internal Revenue Service ("IRS") on behalf of Solara.

Step 5 of the proposed reorganization involves the dissolution of four Legacy Offshore Vehicles — specifically, (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") — and the distribution by each dissolving entity of its partnership interest in Solara Consolidated Master Fund LP (the "Consolidated Master Fund" or "Master Fund") to its existing limited partners ("LPs"). The target effective date for Step 5 is December 1, 2025.

Based upon the analysis set forth below, it is our conclusion that the Step 5 distributions qualify as tax-free liquidating distributions under IRC § 731(a)(1) and (a)(2). Specifically, no gain or loss is recognized to the distributee LPs because the LPs receive only partnership interests — that is, property other than money — and the distributed Consolidated Master Fund LP interests do not constitute "marketable securities" within the meaning of IRC § 731(c)(2), such that the marketable securities exception of § 731(c) does not cause such interests to be treated as "money" for purposes of § 731(a)(1). Furthermore, no gain or loss is recognized by the distributing partnerships under IRC § 731(b), which provides an absolute rule of nonrecognition to a partnership on distributions of property to its partners.

The marketable securities issue under IRC § 731(c) is addressed in greater detail in the companion Tax Memorandum — IRC § 731(c) Marketable Securities Exception (the "§ 731(c) Memorandum"). Our preliminary conclusion in this memorandum — that § 731(c) does not apply — is based upon the fact that the distributed Consolidated Master Fund LP interests are not traded on an established securities market, are not regularly quoted on any interdealer quotation system, and are subject to substantial transfer restrictions under the Consolidated Master Fund's limited partnership agreement.

This memorandum supports Ruling 4 in the PLR request that Calderwood & Harkness intends to submit to the IRS Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"). The PLR request is targeted for submission on or about August 15, 2025.

II. STATEMENT OF FACTS

The following facts have been provided by the client and its advisors and are set forth for purposes of this memorandum. All financial data is current as of March 31, 2025, unless otherwise indicated. We have relied upon the accuracy of these facts, including financial data provided by Caldwell Pierce & Co. LLP, Solara's independent auditor, and have not independently verified such data.

A. Overview of Solara's Fund Platform

Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership (EIN 82-4917366) organized under the Delaware Revised Uniform Limited Partnership Act with approximately $14.7 billion in assets under management ("AUM") as of March 31, 2025. Solara was founded on March 17, 2014, and maintains its principal place of business at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801.

The sole general partner of Solara is Solara Digital Infrastructure GP LLC, a Delaware limited liability company (EIN 82-4917365). Solara Digital Infrastructure GP LLC is managed by Viktor Raines, who serves as Managing Partner and Founder of the Solara platform.

Solara's business consists of serving as a private equity sponsor targeting digital infrastructure assets, including data centers, fiber-optic networks, and edge computing facilities, as well as enterprise software-as-a-service ("SaaS") platforms. In order to accommodate the diverse regulatory, tax, and structuring needs of its investor base, which includes U.S. taxable investors, U.S. tax-exempt investors (such as public pension funds and university endowments), and non-U.S. investors (such as sovereign wealth funds and non-U.S. insurance companies), Solara has historically operated through six parallel fund vehicles organized in three jurisdictions: Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg.

This parallel vehicle structure, while historically appropriate to serve the platform's investor base, has become administratively cumbersome and increasingly costly to maintain. The proposed reorganization is intended to consolidate the platform into a simplified master-feeder structure while preserving the tax benefits and investor protections that the current structure provides. The business rationale for the reorganization is discussed further in Section II.G below.

B. Existing Fund Vehicles (Legacy Offshore Vehicles Subject to Step 5 Dissolution)

The four Legacy Offshore Vehicles that are the subject of Step 5 are described below. Each of these entities is currently classified as a partnership for U.S. federal income tax purposes, as discussed further in Section II.H below.

Fund IV-A Cayman: Solara Digital Partners Fund IV-A (Cayman) LP. Fund IV-A Cayman is a Cayman Islands exempted limited partnership (EIN 98-6241503) registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Its registered office is located at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111, Cayman Islands. Fund IV-A Cayman has a fund size of approximately $1.85 billion and serves as a parallel fund vehicle for non-U.S. investors and U.S. tax-exempt investors. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company.

Fund IV-B Lux: Solara Digital Partners Fund IV-B (Luxembourg) SCSp. Fund IV-B Lux is a Luxembourg special limited partnership (société en commandite spéciale, or "SCSp") (EIN 98-6241571; Registre de Commerce et des Sociétés ("RCS") number B 248193). Its registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund IV-B Lux has a fund size of approximately €1.15 billion (approximately $1.24 billion at the assumed exchange rate of 1.08 EUR/USD). The general partner (associé commandité) of Fund IV-B Lux is Solara Luxembourg Management S.à r.l., a Luxembourg private limited liability company (RCS B 248194).

Fund V-A Cayman: Solara Digital Partners Fund V-A (Cayman) LP. Fund V-A Cayman is a Cayman Islands exempted limited partnership (EIN 98-7891234) registered with CIMA under registration number MF-89103. Its registered office is located at Harborstone Corporate Services Ltd., George Town, Grand Cayman, Cayman Islands. Fund V-A Cayman has a fund size of approximately $2.45 billion and, like Fund IV-A Cayman, serves as a parallel fund vehicle for non-U.S. and U.S. tax-exempt investors.

Fund V-B Lux: Solara Digital Partners Fund V-B (Luxembourg) SCSp. Fund V-B Lux is a Luxembourg SCSp (EIN 98-7891267; RCS B 271056). Its registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund V-B Lux has a fund size of approximately €1.38 billion (approximately $1.49 billion at the assumed exchange rate of 1.08 EUR/USD).

C. Prior Steps in the Reorganization (Steps 1–4)

The proposed reorganization of Solara's fund platform consists of five sequential steps. Steps 1 through 4 precede the Step 5 distributions that are the subject of this memorandum. Each of Steps 1 through 4 is the subject of its own companion memorandum or memoranda, which analyze the applicable Code provisions in detail. The following summary provides the necessary factual context for the § 731 analysis of Step 5.

Step 1 (Target Effective Date: September 15, 2025). In Step 1, Solara will form the following new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the Consolidated Master Fund; (ii) Solara Consolidated Master Fund LP, a Delaware limited partnership (the "Consolidated Master Fund" or "Master Fund"), which will serve as the central investment vehicle in the reorganized master-feeder structure; (iii) Solara International Feeder (Cayman) LP (the "International Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. Each of these entities will file IRS Form 8832 (Entity Classification Election) to elect classification as a partnership for U.S. federal income tax purposes under Treasury Regulations Section 301.7701-3.

Step 2 (Target Effective Date: October 1, 2025). In Step 2, Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund. The aggregate fair market value ("FMV") of the contributed assets is approximately $2.31 billion, and the aggregate adjusted tax basis of such assets is approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. This contribution is intended to qualify for tax-free treatment under IRC § 721(a), as analyzed in the companion Tax Memorandum — IRC § 721(a) Contribution Analysis.

Step 3 (Target Effective Date: October 15, 2025). In Step 3, Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund. The aggregate FMV of the contributed assets is approximately €1.07 billion ($1.16 billion), the aggregate adjusted tax basis is approximately €782 million ($844.6 million), and the aggregate built-in gain is approximately €288 million ($311 million). This contribution is likewise intended to qualify for tax-free treatment under IRC § 721(a).

Step 4 (Target Effective Date: November 1, 2025). In Step 4, both Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Consolidated Master Fund. Fund V-A Cayman's contributed assets have an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and aggregate built-in gain of approximately $550 million. Fund V-B Lux's contributed assets have an aggregate FMV of approximately €1.29 billion ($1.39 billion), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and aggregate built-in gain of approximately €150 million ($162 million). The same § 721(a) nonrecognition treatment applies to both contributions.

D. Step 5 — The Distributions at Issue

Step 5 is the transaction that is the subject of this memorandum. The target effective date for Step 5 is December 1, 2025.

Following the completion of Steps 2 through 4, each Legacy Offshore Vehicle's sole remaining asset will be a limited partnership interest in the Consolidated Master Fund LP. Each Legacy Offshore Vehicle will have contributed all of its portfolio assets (including equity interests in portfolio companies, intercompany receivables, and related assets) to the Consolidated Master Fund in the prior steps, and no other material assets will remain in any Legacy Offshore Vehicle at the time of Step 5.

In Step 5, each Legacy Offshore Vehicle will dissolve in accordance with its governing agreements and applicable law (either Cayman Islands law or Luxembourg law, as applicable) and will distribute its interest in the Consolidated Master Fund LP to its existing LPs in a liquidating distribution. Upon completion of the distributions, each Legacy Offshore Vehicle will be wound up and will cease to exist as a legal entity.

Following the receipt of the distributed Consolidated Master Fund LP interests, the LPs of the dissolving Legacy Offshore Vehicles will migrate into the appropriate feeder vehicles as follows:

Non-U.S. LPs — Non-U.S. limited partners will contribute their received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP, which will hold an interest in the Consolidated Master Fund and will serve as the vehicle through which non-U.S. investors access the platform going forward.

U.S. Tax-Exempt LPs — U.S. tax-exempt limited partners will contribute their received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP, which will hold an interest in the Consolidated Master Fund and will provide mitigation of unrelated business taxable income ("UBTI") concerns through the use of the feeder structure.

U.S. taxable investors are not directly affected by Step 5 because they hold their interests through the existing domestic vehicles — Fund IV LP (EIN 85-2103748) and Fund V LP (EIN 88-3467219) — which co-invest alongside the Consolidated Master Fund and are not subject to dissolution in this reorganization.

E. Representative Limited Partners Affected by Step 5 Distributions

The following representative LPs are among those affected by the Step 5 distributions and are identified here to illustrate the application of the § 731 analysis to specific investor categories:

Nordhaven Sovereign Wealth Fund. Nordhaven Sovereign Wealth Fund is a sovereign wealth fund of the Kingdom of Nordhaven, a non-U.S. sovereign entity. The primary contact is Anders Bjørkman. Nordhaven SWF has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman. As a non-U.S. investor, Nordhaven SWF will roll into Solara International Feeder (Cayman) LP following receipt of its Step 5 distributions.

Kestrel Pacific Insurance Group. Kestrel Pacific Insurance Group is a Singapore-domiciled non-U.S. insurance company. The primary contact is Christine Leung. Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux. As a non-U.S. investor, Kestrel Pacific will roll into Solara International Feeder (Cayman) LP.

Pinnacle State Employees' Retirement System. Pinnacle State Employees' Retirement System ("Pinnacle SERS") is a U.S. public pension fund. The primary contact is Margaret Faulkner, Chief Investment Officer. Pinnacle SERS has committed $275 million to Fund IV and $340 million to Fund V. As a U.S. tax-exempt investor, to the extent that Pinnacle SERS holds interests through the Cayman parallel vehicles, it will roll into Solara Tax-Exempt Feeder (Cayman) LP following receipt of its Step 5 distributions.

Grandview University Endowment. Grandview University Endowment is a Massachusetts-based U.S. tax-exempt endowment. The primary contact is Harold Kingsley. Grandview has committed $120 million to Fund IV and $185 million to Fund V. As a U.S. tax-exempt investor, Grandview will receive similar treatment to Pinnacle SERS and will roll into Solara Tax-Exempt Feeder (Cayman) LP.

F. Aggregate Financial Data Relevant to Step 5

The following aggregate financial data summarizes the portfolio assets originally contributed to the Consolidated Master Fund in Steps 2 through 4 and provides relevant context for the Step 5 distribution analysis:

The following representative portfolio companies illustrate the composition of the contributed assets and the magnitude of built-in gain that will be preserved through the § 704(c) carryover provisions at the Consolidated Master Fund LP level:

The aggregate liabilities of $1.34 billion assumed by the Consolidated Master Fund in Steps 2 through 4 are the subject of a separate and detailed analysis in the companion Tax Memorandum — IRC § 752 Liability Shifting Analysis (the "§ 752 Memorandum"). The interaction of § 752 liability shifts with the § 731 distribution analysis is addressed in Section V.E below.

G. Business Rationale for the Reorganization

The proposed five-step reorganization serves several substantial, non-tax business purposes, which provide independent significance to the transaction and support the conclusion that the anti-abuse provisions of the Code and Treasury Regulations should not be applied to recharacterize any step of the reorganization.

First, the reorganization is expected to result in operational cost reduction of approximately $3.8 million annually through the elimination of duplicative offshore administration, audit, regulatory filing, and legal compliance costs associated with maintaining four separate offshore fund vehicles in two jurisdictions. The existing parallel vehicle structure requires separate annual audits by Caldwell Pierce & Co. LLP (or its local affiliates) for each offshore entity, separate regulatory filings with CIMA and the Commission de Surveillance du Secteur Financier ("CSSF"), and separate administrator agreements with Harborstone Corporate Services Ltd. and Luxembourg-based administration providers.

Second, the OECD Pillar Two Global Anti-Base Erosion ("GloBE") rules have become effective for Luxembourg entities beginning with fiscal year 2025. These rules have substantially diminished the historical benefits of utilizing the Luxembourg SCSp structure, as the GloBE rules may impose a top-up tax on constituent entities that do not meet the minimum effective tax rate of 15%. The reorganization eliminates the Luxembourg SCSp vehicles and thereby simplifies the platform's exposure to the GloBE rules.

Third, the reorganization will result in simplified compliance with the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS"), as the number of reporting entities will be reduced from six parallel vehicles to a single master fund with two feeder vehicles.

Fourth, the reorganization reflects LP-requested governance simplification. The Limited Partner Advisory Committee ("LPAC") has expressed a preference for a simplified structure that reduces the number of entities and streamlines reporting and communications. Preliminary LPAC consent for the reorganization was obtained at the April 22, 2025 LPAC meeting, with 78% in interest voting in favor.

H. Entity Classification

Each of the four Legacy Offshore Vehicles is classified as a partnership for U.S. federal income tax purposes. Fund IV-A Cayman and Fund V-A Cayman are Cayman Islands exempted limited partnerships that are treated as partnerships under the default classification rules of Treasury Regulations Section 301.7701-3(b)(2)(i) (applicable to eligible entities with two or more members that are formed outside the United States). Fund IV-B Lux and Fund V-B Lux are Luxembourg SCSp entities that are likewise treated as partnerships for U.S. federal income tax purposes under the same default classification rules.

The Consolidated Master Fund LP has elected, or will elect, partnership classification for U.S. federal income tax purposes under Treasury Regulations Section 301.7701-3 by filing IRS Form 8832. The International Feeder and the Tax-Exempt Feeder have likewise elected, or will elect, partnership classification by filing Form 8832.

A detailed entity classification analysis for each of the entities in the reorganized structure is provided in the companion Tax Memorandum — Entity Classification Under Treas. Reg. § 301.7701-3. For purposes of this memorandum, we assume and rely upon the conclusion that each of the Legacy Offshore Vehicles and each of the new entities is properly classified as a partnership for U.S. federal income tax purposes.

III. ISSUES PRESENTED

This memorandum addresses the following issues arising under IRC § 731 in connection with the Step 5 distributions:

1. Whether the distributions by each Legacy Offshore Vehicle of its partnership interest in the Consolidated Master Fund LP to its LPs in dissolution and liquidation are treated as tax-free distributions under IRC § 731(a)(1), resulting in no gain recognition to the distributee LPs.

2. Whether any gain or loss is recognized by the distributing partnerships (i.e., the four Legacy Offshore Vehicles) under IRC § 731(b) as a result of the Step 5 distributions.

3. Whether the distributed Consolidated Master Fund LP interests could be treated as "money" under IRC § 731(a)(1) or otherwise trigger gain recognition to the distributee LPs under any provision of the Code.

4. Whether the distributed Consolidated Master Fund LP interests constitute "marketable securities" treated as money under IRC § 731(c), which would potentially require gain recognition by the distributee LPs. This issue is the subject of a cross-reference to the companion § 731(c) Memorandum.

5. Whether the Step 5 distributions constitute liquidating distributions or current distributions for purposes of Subchapter K, and the applicable analytical framework for determining basis and gain or loss consequences.

6. The interaction of IRC § 731 with IRC § 752 liability shifts occurring as a result of the dissolution of the Legacy Offshore Vehicles. This issue is the subject of a cross-reference to the companion § 752 Memorandum.

IV. SHORT ANSWERS

1. Yes. The Step 5 distributions are tax-free under IRC § 731(a)(1). No gain is recognized by the distributee LPs because the LPs receive property other than money (i.e., limited partnership interests in the Consolidated Master Fund LP), and the IRC § 731(c) marketable securities exception does not apply to treat the distributed partnership interests as money. No loss is recognized under § 731(a)(2) because the LPs receive property other than money, unrealized receivables, and inventory items.

2. No gain or loss is recognized by the distributing partnerships. Under IRC § 731(b), no gain or loss shall be recognized to a partnership on a distribution to a partner of property, including money. This rule applies to each of the four Legacy Offshore Vehicles distributing its Consolidated Master Fund LP interest to its LPs in liquidation.

3. No. The Consolidated Master Fund LP interests are "property" within the meaning of IRC § 731, not "money." They are not treated as money under any provision of the Code other than IRC § 731(c), and, as set forth in the response to Issue 4 below, § 731(c) does not apply.

4. No. The Consolidated Master Fund LP interests are not "marketable securities" under IRC § 731(c)(2) because they are not traded on an established securities market, are not listed on any national securities exchange, are not regularly quoted on any interdealer quotation system, and are subject to substantial transfer restrictions under the Consolidated Master Fund's limited partnership agreement. A detailed analysis of the § 731(c) question is provided in the companion § 731(c) Memorandum.

5. Liquidating distributions. Because each Legacy Offshore Vehicle is dissolving and distributing all of its remaining assets (consisting solely of its Consolidated Master Fund LP interest) to its LPs, the Step 5 distributions constitute liquidating distributions of each LP's entire interest in the applicable Legacy Offshore Vehicle. Accordingly, the basis of the distributed Consolidated Master Fund LP interest in the hands of each distributee LP is determined under IRC § 732(b) — that is, the LP's basis in the distributed property equals the LP's adjusted basis in its partnership interest in the dissolving Legacy Offshore Vehicle, reduced by any money received (which is zero in this case).

6. Liability shifts under § 752 do not alter the nonrecognition conclusion. Although the dissolution of the Legacy Offshore Vehicles will cause liability shifts that produce deemed money distributions under IRC § 752(b), the companion § 752 Memorandum concludes that the netting rules of Treasury Regulations Section 1.752-1(f) prevent any LP from experiencing a net deemed money distribution in excess of its adjusted basis in its Legacy Offshore Vehicle interest. Therefore, no gain is recognized under § 731(a)(1) by reason of § 752 liability shifts.

V. ANALYSIS

A. Statutory Framework — IRC § 731 Overview

1. Section 731(a) — Distribution to Partners

IRC § 731(a) sets forth the general rules governing gain and loss recognition by partners upon distributions of property by a partnership. Section 731(a) provides two operative rules:

Under § 731(a)(1), in the case of a distribution by a partnership to a partner, gain shall not be recognized to the partner except to the extent that any money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution. This rule establishes the foundational principle that distributions of property other than money are generally nonrecognition events under Subchapter K. The rationale for this rule is that a partner's receipt of property from a partnership in which the partner holds an interest is a continuation of the partner's indirect ownership of that property, rather than a realization event. The gain is preserved through the basis rules of § 732 and will be recognized when the partner subsequently disposes of the distributed property in a taxable transaction.

Under § 731(a)(2), in the case of a distribution in liquidation of a partner's interest in a partnership, loss shall be recognized to the partner only if the only property distributed to the partner consists of money, unrealized receivables (as defined in § 751(c)), and inventory items (as defined in § 751(d)). If the partner receives any other property — as is the case here, where the LPs receive partnership interests in the Consolidated Master Fund — no loss is recognized. Instead, the partner's loss, if any, is deferred through the basis mechanics of § 732(b).

The combined effect of §§ 731(a)(1) and 731(a)(2) is that a distribution of property other than money to a partner generally results in no recognition of gain or loss. Gain recognition occurs only when money (or money equivalents, including deemed money under § 752(b) or marketable securities treated as money under § 731(c)) exceeds the partner's outside basis. Loss recognition occurs only in a liquidating distribution where the partner receives solely money, unrealized receivables, and inventory items and the aggregate of those amounts is less than the partner's outside basis.

2. Section 731(b) — No Gain or Loss to Distributing Partnership

IRC § 731(b) provides a simple and absolute rule: no gain or loss shall be recognized to a partnership on a distribution to a partner of property, including money. This provision applies to the partnership level and is not subject to any of the exceptions that apply at the partner level (e.g., the money-exceeds-basis exception of § 731(a)(1) or the marketable securities rule of § 731(c)).

The § 731(b) nonrecognition rule applies regardless of whether the distribution is a current distribution or a liquidating distribution, and regardless of whether the distributed property has a fair market value in excess of its adjusted basis in the hands of the distributing partnership. The rationale for § 731(b) is that a partnership distribution is not a sale or exchange by the partnership, but rather a division of partnership property among the partners who already own such property indirectly through their partnership interests. Any built-in gain in the distributed property is preserved through the basis rules of § 732 and is recognized at the partner level upon a subsequent disposition.

Application to Step 5: Each Legacy Offshore Vehicle recognizes no gain or loss when it distributes its Consolidated Master Fund LP interest to its LPs in liquidation. This result holds even though the distributed Consolidated Master Fund LP interests reflect substantial built-in gain in the underlying portfolio assets (an aggregate of $1.72 billion across all four vehicles). The built-in gain is preserved through the § 704(c) carryover provisions at the Consolidated Master Fund LP level, as analyzed in the companion Tax Memorandum — IRC § 704(c) Built-In Gain Carryover.

3. Section 731(c) — Marketable Securities Treated as Money

IRC § 731(c), enacted as part of the Revenue Reconciliation Act of 1994 (Pub. L. No. 103-465, § 741), provides a significant exception to the general nonrecognition rule of § 731(a)(1). Under § 731(c)(1)(A), for purposes of § 731(a)(1) and § 737, the term "money" includes marketable securities. This means that if a partnership distributes marketable securities to a partner, the distribution is treated as a distribution of money to the extent of the fair market value of the securities at the time of the distribution, potentially triggering gain recognition to the distributee partner.

Section 731(c)(2) defines "marketable securities" as financial instruments (including stocks, bonds, notes, and other financial instruments specified by the Secretary) that are, as of the date of the distribution, "actively traded" within the meaning of § 1092(d)(1). Under § 1092(d)(1), a financial instrument is "actively traded" if it is traded on (or subject to the rules of) a national securities exchange that is registered under Section 6 of the Securities Exchange Act of 1934, a board of trade designated as a contract market by the Commodity Futures Trading Commission, or any other market that the Secretary determines has rules adequate to carry out the purposes of Section 1092. Section 731(c)(2)(B) further extends the definition to include interests in entities that are actively traded, certain interests in common trust funds and regulated investment companies, and any financial instrument that is convertible into, or exchangeable for, such instruments.

The question presented in this memorandum is whether the Consolidated Master Fund LP interests could be treated as "marketable securities" under § 731(c)(2). Our preliminary conclusion, which is supported in greater detail in the companion § 731(c) Memorandum, is that the Consolidated Master Fund LP interests are not marketable securities. This conclusion rests on the following factors:

(a) The Consolidated Master Fund LP interests are not listed on any national securities exchange, including the New York Stock Exchange ("NYSE"), the Nasdaq Stock Market, or any other exchange registered under Section 6 of the Securities Exchange Act of 1934.

(b) The Consolidated Master Fund LP interests are not regularly quoted on any interdealer quotation system.

(d) The Consolidated Master Fund LP interests are subject to extensive transfer restrictions under the Consolidated Master Fund's limited partnership agreement, including requirements for general partner consent, minimum hold periods, and compliance with applicable securities law exemptions.

(e) The Consolidated Master Fund LP interests are held by a limited group of institutional and professional investors and are not offered to the general public.

Because the § 731(c) exception does not apply, the Consolidated Master Fund LP interests are not treated as "money" for purposes of § 731(a)(1), and the distributions of such interests do not trigger gain recognition. The companion § 731(c) Memorandum provides a comprehensive analysis of this issue, including a discussion of the legislative history of § 731(c), the applicable Treasury Regulations (Treas. Reg. § 1.731-2), and relevant administrative guidance.

B. Characterization of the Step 5 Transactions

1. Nature of the Distributions — Liquidating vs. Current

The distinction between a current distribution and a liquidating distribution is significant under Subchapter K because different basis rules apply. In a current distribution, the basis of distributed property in the hands of the distributee partner is determined under § 732(a), which provides that the partner's basis in the distributed property equals the distributing partnership's adjusted basis in such property immediately before the distribution, but not in excess of the partner's adjusted basis in the partnership interest reduced by any money received. In a liquidating distribution, by contrast, the basis of distributed property is determined under § 732(b), which provides that the partner's basis in the distributed property equals the partner's adjusted basis in the partnership interest, reduced by any money received.

Under the facts presented, each Legacy Offshore Vehicle is dissolving in full. All portfolio assets of each Legacy Offshore Vehicle have been contributed to the Consolidated Master Fund in Steps 2 through 4. As of the target effective date for Step 5 (December 1, 2025), the sole remaining asset of each Legacy Offshore Vehicle will be its limited partnership interest in the Consolidated Master Fund. Each Legacy Offshore Vehicle will distribute that interest to its LPs and then wind up and dissolve.

The Step 5 distributions therefore constitute liquidating distributions of each LP's entire interest in the applicable Legacy Offshore Vehicle. The applicable basis provision is § 732(b), not § 732(a). In a liquidating distribution, the basis of the distributed property in the hands of the distributee partner is substituted to equal the partner's adjusted basis in its partnership interest (reduced by any money received), regardless of the distributing partnership's basis in the distributed property. This ensures that no gain or loss is recognized at the time of the distribution and that the partner's investment in the partnership is fully accounted for through the basis in the distributed property.

The classification of the Step 5 distributions as liquidating distributions is consistent with the treatment described in Treasury Regulations Section 1.731-1(a)(1), which provides that distributions are treated as liquidating distributions when a partner receives distributions in complete liquidation of the partner's entire interest in the partnership.

2. Property vs. Money Characterization

The critical threshold question under § 731(a)(1) is whether the distributed item is "money" or "property." If the distributed item is property (other than money or marketable securities treated as money), no gain is recognized to the distributee partner, regardless of the fair market value of the distributed property.

The Consolidated Master Fund LP interests distributed in Step 5 are limited partnership interests in a Delaware limited partnership. Partnership interests are "property" within the meaning of § 731 and the broader Code. They are not "money" under general federal income tax principles. The term "money" as used in § 731(a)(1) refers to cash, checks, demand deposits, and other items that constitute a medium of exchange or legal tender. Partnership interests, by contrast, are equity interests in a legal entity and are universally recognized as "property" for federal income tax purposes.

This characterization is not altered by the fact that the Consolidated Master Fund LP interests have substantial value. The aggregate fair market value of the assets underlying the four Consolidated Master Fund LP interests distributed in Step 5 is approximately $7.75 billion. However, the value of distributed property is irrelevant under § 731(a)(1); what matters is whether the distributed item is money or property. Because the Consolidated Master Fund LP interests are property, not money, the threshold condition for gain recognition under § 731(a)(1) is not satisfied.

The distribution of a partnership interest by a partnership is specifically contemplated by Subchapter K and has been the subject of numerous revenue rulings, private letter rulings, and administrative pronouncements confirming that such distributions are treated as distributions of property subject to the general nonrecognition rules of § 731. The distribution of a partnership interest in one partnership by another partnership does not present any novel or unusual issue under § 731; it is a routine transaction in the context of tiered partnership structures, and the tax consequences are well-established.

C. Application of § 731(a)(1) — No Gain Recognition to Distributee LPs

1. No Money Distributed

The sole property distributed by each Legacy Offshore Vehicle to its LPs in Step 5 is a limited partnership interest in the Consolidated Master Fund LP. No cash, checks, demand deposits, or other items constituting "money" within the meaning of § 731(a)(1) are distributed as part of Step 5. The Legacy Offshore Vehicles will not make any cash distributions, declare any dividends (the partnership equivalent), or distribute any property other than the Consolidated Master Fund LP interests.

Because no money is distributed, the threshold condition for gain recognition under § 731(a)(1) — that money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution — is not met. The amount of "money" distributed is zero, and zero cannot exceed any positive adjusted basis amount. Accordingly, no gain is recognized to any distributee LP under § 731(a)(1) by reason of the Step 5 distributions.

This conclusion is subject to the analysis of two potential exceptions: (a) whether the distributed Consolidated Master Fund LP interests could be treated as "money" under the marketable securities rule of § 731(c), and (b) whether any deemed money distribution arises under § 752(b) as a result of liability shifts incident to the dissolution of the Legacy Offshore Vehicles. Both of these exceptions are analyzed below and are concluded not to apply.

2. Section 731(c) — Marketable Securities Analysis (Summary)

As discussed in Section V.A.3 above, IRC § 731(c) provides that for purposes of § 731(a)(1), the term "money" includes marketable securities. If the Consolidated Master Fund LP interests were "marketable securities" within the meaning of § 731(c)(2), the distribution of such interests would be treated as a distribution of money to the extent of the fair market value of such interests, potentially triggering gain recognition.

The § 731(c)(2)(A) definition of "marketable securities" requires that the financial instrument be "actively traded" as of the date of the distribution. Under § 731(c)(2)(B), an interest in a partnership or other entity is treated as a financial instrument for this purpose, but only if such interest is "actively traded" within the meaning of § 1092(d)(1).

The Consolidated Master Fund LP interests do not satisfy any of the criteria for classification as "marketable securities":

(a) Not listed on a national securities exchange. The Consolidated Master Fund LP interests are not listed on the NYSE, Nasdaq, or any other national securities exchange registered under Section 6 of the Securities Exchange Act of 1934. The Consolidated Master Fund is a private investment partnership, and its interests are offered and sold only to accredited investors and qualified purchasers under exemptions from registration under the Securities Act of 1933.

(b) Not regularly quoted on an interdealer quotation system. The Consolidated Master Fund LP interests are not quoted on OTC Markets, the Vireo Software interdealer quotation system, or any other interdealer quotation system.

(c) Not actively traded on an established secondary market. There is no established secondary market for the Consolidated Master Fund LP interests. While a limited secondary market exists for certain private fund interests (e.g., through specialized intermediaries such as Adriatic Industries or Quillon Securities), no regular or systematic trading in the Consolidated Master Fund LP interests occurs or is expected to occur on any such market.

(d) Subject to substantial transfer restrictions. The Consolidated Master Fund's limited partnership agreement contains extensive transfer restrictions, including the requirement of prior written consent of the general partner for any transfer, assignment, or other disposition of any limited partnership interest. These transfer restrictions are binding on all limited partners and effectively prevent any active trading of the interests.

(e) Held by a limited group of institutional investors. The Consolidated Master Fund LP interests are held by a small group of sophisticated institutional investors, including sovereign wealth funds, pension funds, endowments, and insurance companies. The interests are not offered to the general public and are not marketed on any exchange, trading platform, or quotation system.

Based on these factors, the Consolidated Master Fund LP interests are not "marketable securities" under § 731(c)(2), and the § 731(c) exception does not apply to treat the Step 5 distributions as distributions of money. This conclusion is supported in greater detail in the companion § 731(c) Memorandum, which includes a comprehensive analysis of the applicable statutory provisions, Treasury Regulations (including Treas. Reg. § 1.731-2), legislative history, and administrative guidance.

3. Basis Consequences Under § 732(b)

Because the Step 5 distributions are liquidating distributions (as discussed in Section V.B.1 above), the basis of the Consolidated Master Fund LP interest received by each distributee LP is determined under IRC § 732(b). Under § 732(b), the basis of distributed property received by a partner in liquidation of the partner's interest in a partnership shall be an amount equal to the adjusted basis of such partner's interest in the partnership, reduced (but not below zero) by the amount of any money distributed to the partner.

Because no money is distributed to any LP in Step 5, the basis reduction under § 732(b) for money received is zero. Accordingly, each LP's basis in its Consolidated Master Fund LP interest will equal the LP's adjusted basis in its partnership interest in the dissolving Legacy Offshore Vehicle, determined immediately before the Step 5 distribution. This result ensures the complete continuity of tax attributes: the LP's aggregate investment basis is preserved and transferred from the Legacy Offshore Vehicle interest to the Consolidated Master Fund LP interest without any step-up or step-down (except to the extent required by the § 732(b) substituted basis rule).

The individual basis calculations for each LP will need to be computed on an LP-by-LP basis, taking into account each LP's capital account history, prior allocations of income, gain, loss, and deductions, any prior distributions, and any adjustments arising under § 752 (including deemed contributions and deemed distributions resulting from liability shifts). We have requested the necessary data from Caldwell Pierce & Co. LLP (Helen Okamoto, engagement partner) and expect to receive the LP-by-LP basis schedules in the coming weeks. The companion draft data request outlines the specific information needed for each LP.

4. Holding Period — § 1223(1)

Under IRC § 1223(1), the holding period of property received in a nonrecognition transaction includes the holding period of the property exchanged, provided that the property received has the same basis in whole or in part as the property exchanged, or that the property received was received in a transaction where no gain or loss was recognized. Because the Step 5 distributions are nonrecognition transactions under § 731(a), and because the basis of the distributed Consolidated Master Fund LP interests is determined under § 732(b) by reference to the LP's basis in its Legacy Offshore Vehicle interest, § 1223(1) applies to tack the LP's holding period.

Accordingly, each LP's holding period in its Consolidated Master Fund LP interest received in Step 5 will include the LP's holding period in its partnership interest in the dissolving Legacy Offshore Vehicle. For LPs of Fund IV-A Cayman and Fund IV-B Lux, the tacked holding period traces back to the date of acquisition of each LP's interest in the applicable Fund IV vehicle. The final closing of Fund IV occurred on June 15, 2021, and accordingly the holding period of interests acquired at or before the final close will begin no later than June 15, 2021 (with earlier closes providing correspondingly earlier holding period commencement dates). For LPs of Fund V-A Cayman and Fund V-B Lux, the tacked holding period traces back to the date of acquisition of each LP's interest in the applicable Fund V vehicle. The final closing of Fund V occurred on September 30, 2023.

In all cases, the tacked holding period ensures that the LPs' holding periods in their Consolidated Master Fund LP interests received in Step 5 will exceed one year as of the date of the distribution (December 1, 2025), satisfying the long-term capital gain holding period requirement of § 1222 should any LP subsequently dispose of its interest in a taxable transaction.

D. Application of § 731(b) — No Gain or Loss to Distributing Partnerships

As discussed in Section V.A.2 above, IRC § 731(b) provides an absolute rule that no gain or loss is recognized to a partnership on a distribution of property to a partner. This rule is not subject to any of the exceptions applicable at the partner level (e.g., the § 731(a)(1) money-exceeds-basis exception or the § 731(c) marketable securities rule). The § 731(b) rule applies to both current and liquidating distributions and applies regardless of the fair market value or built-in gain of the distributed property.

Application to Step 5: Each of the four Legacy Offshore Vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — recognizes no gain or loss when it distributes its Consolidated Master Fund LP interest to its respective LPs in the Step 5 liquidating distributions. This result obtains notwithstanding the fact that the distributed Consolidated Master Fund LP interests reflect, in the aggregate, approximately $1.72 billion of built-in gain in the underlying portfolio assets.

The built-in gain is not lost or eliminated as a result of the Step 5 distributions. Rather, it is preserved through the interaction of multiple provisions of Subchapter K. At the Consolidated Master Fund LP level, the built-in gain inherent in the contributed portfolio assets is preserved through the § 704(c) carryover provisions, which ensure that pre-contribution built-in gain is allocated to the contributing partner (or its successor) when the gain is subsequently recognized by the Consolidated Master Fund. The § 704(c) analysis is provided in the companion Tax Memorandum — IRC § 704(c) Built-In Gain Carryover and the companion Tax Memorandum — IRC § 704(c) Remedial Allocation Method Election.

At the LP level, the distributee LPs' bases in their Consolidated Master Fund LP interests (and subsequently in their feeder partnership interests) preserve the LPs' unrealized gain or loss through the substituted basis rules of §§ 732(b) and 722.

E. Interaction with § 752 — Deemed Money Distributions

1. Overview of the § 752 Issue

The dissolution of the Legacy Offshore Vehicles in Step 5 creates a potential § 752 issue that must be analyzed in conjunction with the § 731 distribution analysis. Under IRC § 752(b), any decrease in a partner's share of the liabilities of a partnership, or any decrease in a partner's individual liabilities by reason of the assumption by the partnership of such individual liabilities, is considered a distribution of money to the partner by the partnership. A deemed money distribution under § 752(b) is treated as actual money for purposes of § 731(a)(1), and thus could trigger gain recognition if the deemed distribution exceeds the partner's adjusted basis in the partnership.

When the Legacy Offshore Vehicles dissolve in Step 5, any liabilities of those entities shift. To the extent that a Legacy Offshore Vehicle had liabilities that were shared among its partners under the § 752 allocation rules, the dissolution causes each LP's share of those liabilities to decrease to zero, generating a deemed money distribution under § 752(b). Simultaneously, however, the LPs may experience deemed contributions under § 752(a) by reason of assuming a share of the Consolidated Master Fund's liabilities through their receipt of Consolidated Master Fund LP interests (and subsequently through their feeder partnership interests).

The $1.34 billion in aggregate liabilities assumed by the Consolidated Master Fund in Steps 2 through 4 created liability shifts that were analyzed in connection with those earlier steps. Step 5 creates additional shifts as the Legacy Offshore Vehicles cease to exist as legal entities and their liability allocations terminate.

2. Cross-Reference to § 752 Memorandum

The companion Tax Memorandum — IRC § 752 Liability Shifting Analysis provides a detailed, LP-by-LP modeling of the $1.34 billion in aggregate liabilities across all partners. That memorandum applies the liability allocation rules of Treasury Regulations Sections 1.752-1 through 1.752-4, including the rules for recourse liabilities (Treas. Reg. § 1.752-2) and nonrecourse liabilities (Treas. Reg. § 1.752-3), to determine each LP's share of liabilities before and after the Step 5 distributions.

The § 752 Memorandum concludes that the netting rules of Treasury Regulations Section 1.752-1(f) prevent gain recognition under § 731(a)(1). Under Treas. Reg. § 1.752-1(f), if, as part of the same transaction (or a series of related transactions), a partner both incurs increases and decreases in the partner's share of partnership liabilities, the deemed contributions and deemed distributions under §§ 752(a) and 752(b) are netted. Only the net amount is treated as a contribution or distribution, as applicable. In the context of Step 5, the LPs' deemed distributions (arising from the termination of their shares of Legacy Offshore Vehicle liabilities) are netted against the LPs' deemed contributions (arising from the assumption of shares of Consolidated Master Fund liabilities through the distributed interests). After netting, no LP experiences a net deemed money distribution exceeding its adjusted basis.

The § 752 Memorandum also applies the tiered partnership rules to account for the fact that, after Step 5, the non-U.S. LPs and U.S. tax-exempt LPs will hold their interests in the Consolidated Master Fund indirectly through the feeder partnerships (International Feeder and Tax-Exempt Feeder). The tiered partnership rules require a look-through analysis to allocate the Consolidated Master Fund's liabilities to the feeder partnerships and then to the ultimate LPs.

The § 752 Memorandum supports Ruling 5 in the PLR request.

3. Summary Conclusion on § 752 Interaction

After application of the netting rules of Treas. Reg. § 1.752-1(f), no LP experiences a net deemed money distribution under § 752(b) that exceeds the LP's adjusted basis in its Legacy Offshore Vehicle interest. Accordingly, the § 752 liability shifts associated with the Step 5 distributions do not cause gain recognition under § 731(a)(1). The nonrecognition treatment of the Step 5 distributions is fully preserved notwithstanding the § 752 interaction.

F. Analysis by Distributing Entity

The following subsections apply the § 731 analysis to each of the four Legacy Offshore Vehicles individually. Although the legal analysis is the same in each case, the entity-by-entity discussion provides the specificity needed for the PLR request and confirms that the conclusion applies to each Legacy Offshore Vehicle separately.

1. Fund IV-A (Cayman) LP

Pre-Step 5 Facts. In Step 2 (target effective date October 1, 2025), Fund IV-A (Cayman) LP contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately $2.31 billion, an aggregate adjusted tax basis of approximately $1.62 billion, and aggregate built-in gain of approximately $690 million. Key portfolio companies contributed by Fund IV-A Cayman include NovaBright Data Systems Inc. (60% interest; $890 million FMV / $520 million basis) and Thorngate Fiber Networks LP (100% interest; $670 million FMV / $490 million basis).

After the completion of Step 2, Fund IV-A Cayman's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP. Fund IV-A Cayman has no other material assets, liabilities, or obligations (other than winding-up obligations under Cayman Islands law) as of the target date for Step 5.

Step 5 Distribution. In Step 5, Fund IV-A Cayman will distribute its Consolidated Master Fund LP interest to its LPs in a liquidating distribution. The LPs of Fund IV-A Cayman include, among others, Nordhaven Sovereign Wealth Fund ($380 million commitment) and various U.S. tax-exempt investors. Each LP will receive a pro rata share of the Consolidated Master Fund LP interest held by Fund IV-A Cayman, determined in accordance with the LP's percentage interest in Fund IV-A Cayman under the fund's limited partnership agreement.

Following the distribution, non-U.S. LPs will contribute their received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP, and U.S. tax-exempt LPs will contribute their received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP.

§ 731(a)(1) Analysis. No money is distributed by Fund IV-A Cayman to any LP. The sole distributed property is the Consolidated Master Fund LP interest, which is "property" and not "money." The § 731(c) marketable securities exception does not apply. Accordingly, no gain is recognized by any distributee LP under § 731(a)(1).

§ 731(b) Analysis. Under § 731(b), Fund IV-A Cayman recognizes no gain or loss on the distribution of the Consolidated Master Fund LP interest to its LPs.

§ 732(b) Basis Consequence. Each LP of Fund IV-A Cayman takes a basis in its received Consolidated Master Fund LP interest equal to the LP's adjusted basis in its Fund IV-A Cayman interest, reduced by any money received (zero).

2. Fund IV-B (Luxembourg) SCSp

Pre-Step 5 Facts. In Step 3 (target effective date October 15, 2025), Fund IV-B (Luxembourg) SCSp contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately €1.07 billion ($1.16 billion), an aggregate adjusted tax basis of approximately €782 million ($844.6 million), and aggregate built-in gain of approximately €288 million ($311 million). The key portfolio company contributed by Fund IV-B Lux is Crestline Cloud Solutions LLC (100% interest; €340 million ($367 million) FMV / €195 million ($211 million) basis).

After the completion of Step 3, Fund IV-B Lux's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.

Step 5 Distribution. In Step 5, Fund IV-B Lux will dissolve and distribute its Consolidated Master Fund LP interest to its LPs, including Kestrel Pacific Insurance Group (€200 million commitment), in a liquidating distribution. Non-U.S. LPs will contribute their received interests to Solara International Feeder (Cayman) LP.

§ 731 Analysis. The § 731 analysis for Fund IV-B Lux is identical in all material respects to the analysis for Fund IV-A Cayman. No money is distributed; no gain is recognized by the distributee LPs under § 731(a)(1); no gain or loss is recognized by Fund IV-B Lux under § 731(b); and each LP's basis in its received Consolidated Master Fund LP interest is determined under § 732(b).

Luxembourg Dissolution. The dissolution of Fund IV-B Lux under Luxembourg law is addressed in the companion Tax Memorandum — Luxembourg Tax Implications of SCSp Dissolution. Veldhuis & Gérard S.à r.l. (Marc Gérard, partner) is advising on local Luxembourg law requirements, including the CSSF notification process and the RCS deregistration procedures applicable to the dissolution of a Luxembourg SCSp (RCS B 248193). The Luxembourg dissolution process does not affect the U.S. federal income tax analysis under § 731, but coordination with local counsel is necessary to ensure that the timing and mechanics of the dissolution are consistent with the representations to be made in the PLR request.

3. Fund V-A (Cayman) LP

Pre-Step 5 Facts. In Step 4 (target effective date November 1, 2025), Fund V-A (Cayman) LP contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and aggregate built-in gain of approximately $550 million. Key portfolio companies contributed by Fund V-A Cayman include Veridian Edge Computing Corp. (55% interest; $1.12 billion FMV / $780 million basis) and Helix SaaS Holdings Ltd. (100% interest; $445 million FMV / $310 million basis).

After the completion of Step 4, Fund V-A Cayman's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.

Step 5 Distribution. In Step 5, Fund V-A Cayman will distribute its Consolidated Master Fund LP interest to its LPs (including Nordhaven Sovereign Wealth Fund, $500 million commitment, and various U.S. tax-exempt investors) in a liquidating distribution. Non-U.S. LPs will roll into the International Feeder, and U.S. tax-exempt LPs will roll into the Tax-Exempt Feeder.

§ 731 Analysis. The same nonrecognition analysis applies. No money is distributed; no gain is recognized under § 731(a)(1); no gain or loss is recognized by Fund V-A Cayman under § 731(b); and each LP's basis is determined under § 732(b). The analysis is identical in all material respects to the analyses for Fund IV-A Cayman and Fund IV-B Lux.

4. Fund V-B (Luxembourg) SCSp

Pre-Step 5 Facts. In Step 4 (target effective date November 1, 2025), Fund V-B (Luxembourg) SCSp contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately €1.29 billion ($1.39 billion), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and aggregate built-in gain of approximately €150 million ($162 million). The key investor in Fund V-B Lux is Kestrel Pacific Insurance Group (€275 million commitment).

After the completion of Step 4, Fund V-B Lux's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.

Step 5 Distribution. In Step 5, Fund V-B Lux will dissolve and distribute its Consolidated Master Fund LP interest to its LPs in a liquidating distribution. Non-U.S. LPs will contribute their received interests to Solara International Feeder (Cayman) LP.

§ 731 Analysis. The same § 731 nonrecognition analysis applies as described above for the other three Legacy Offshore Vehicles.

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Leonard Cross, Responsible Partner, Tax; Sylvia Hartwell, Billing Partner, Tax — Calderwood & Harkness LLP
FROM: Robert Jansen, Lead Associate, Tax; Garrett Simmons, Working Associate, Tax — Calderwood & Harkness LLP
DATE: June 16, 2025
RE: IRC § 731 Distribution Analysis — Step 5 of Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization
MATTER: Solara Digital Infrastructure LP — PLR Request
ENGAGEMENT NO.: 20250527-SDILP-PLR
CLIENT: Solara Digital Infrastructure LP
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I. EXECUTIVE SUMMARY
The purpose of this memorandum is to analyze the United States federal income tax consequences under Section 731 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), of Step 5 of the proposed five-step cross-border reorganization of the fund platform of Solara Digital Infrastructure LP ("Solara" or "SDILP"). This memorandum is one in a series of companion memoranda prepared by Calderwood & Harkness LLP in connection with the private letter ruling ("PLR") request that the firm intends to submit to the Internal Revenue Service ("IRS") on behalf of Solara.
Step 5 of the proposed reorganization involves the dissolution of four Legacy Offshore Vehicles — specifically, (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") — and the distribution by each dissolving entity of its partnership interest in Solara Consolidated Master Fund LP (the "Consolidated Master Fund" or "Master Fund") to its existing limited partners ("LPs"). The target effective date for Step 5 is December 1, 2025.
Based upon the analysis set forth below, it is our conclusion that the Step 5 distributions qualify as tax-free liquidating distributions under IRC § 731(a)(1) and (a)(2). Specifically, no gain or loss is recognized to the distributee LPs because the LPs receive only partnership interests — that is, property other than money — and the distributed Consolidated Master Fund LP interests do not constitute "marketable securities" within the meaning of IRC § 731(c)(2), such that the marketable securities exception of § 731(c) does not cause such interests to be treated as "money" for purposes of § 731(a)(1). Furthermore, no gain or loss is recognized by the distributing partnerships under IRC § 731(b), which provides an absolute rule of nonrecognition to a partnership on distributions of property to its partners.
The marketable securities issue under IRC § 731(c) is addressed in greater detail in the companion Tax Memorandum — IRC § 731(c) Marketable Securities Exception (the "§ 731(c) Memorandum"). Our preliminary conclusion in this memorandum — that § 731(c) does not apply — is based upon the fact that the distributed Consolidated Master Fund LP interests are not traded on an established securities market, are not regularly quoted on any interdealer quotation system, and are subject to substantial transfer restrictions under the Consolidated Master Fund's limited partnership agreement.
This memorandum supports Ruling 4 in the PLR request that Calderwood & Harkness intends to submit to the IRS Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"). The PLR request is targeted for submission on or about August 15, 2025.
II. STATEMENT OF FACTS
The following facts have been provided by the client and its advisors and are set forth for purposes of this memorandum. All financial data is current as of March 31, 2025, unless otherwise indicated. We have relied upon the accuracy of these facts, including financial data provided by Caldwell Pierce & Co. LLP, Solara's independent auditor, and have not independently verified such data.
A. Overview of Solara's Fund Platform
Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership (EIN 82-4917366) organized under the Delaware Revised Uniform Limited Partnership Act with approximately $14.7 billion in assets under management ("AUM") as of March 31, 2025. Solara was founded on March 17, 2014, and maintains its principal place of business at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801.
The sole general partner of Solara is Solara Digital Infrastructure GP LLC, a Delaware limited liability company (EIN 82-4917365). Solara Digital Infrastructure GP LLC is managed by Viktor Raines, who serves as Managing Partner and Founder of the Solara platform.
Solara's business consists of serving as a private equity sponsor targeting digital infrastructure assets, including data centers, fiber-optic networks, and edge computing facilities, as well as enterprise software-as-a-service ("SaaS") platforms. In order to accommodate the diverse regulatory, tax, and structuring needs of its investor base, which includes U.S. taxable investors, U.S. tax-exempt investors (such as public pension funds and university endowments), and non-U.S. investors (such as sovereign wealth funds and non-U.S. insurance companies), Solara has historically operated through six parallel fund vehicles organized in three jurisdictions: Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg.
This parallel vehicle structure, while historically appropriate to serve the platform's investor base, has become administratively cumbersome and increasingly costly to maintain. The proposed reorganization is intended to consolidate the platform into a simplified master-feeder structure while preserving the tax benefits and investor protections that the current structure provides. The business rationale for the reorganization is discussed further in Section II.G below.
B. Existing Fund Vehicles (Legacy Offshore Vehicles Subject to Step 5 Dissolution)
The four Legacy Offshore Vehicles that are the subject of Step 5 are described below. Each of these entities is currently classified as a partnership for U.S. federal income tax purposes, as discussed further in Section II.H below.
Fund IV-A Cayman: Solara Digital Partners Fund IV-A (Cayman) LP. Fund IV-A Cayman is a Cayman Islands exempted limited partnership (EIN 98-6241503) registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. Its registered office is located at Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111, Cayman Islands. Fund IV-A Cayman has a fund size of approximately $1.85 billion and serves as a parallel fund vehicle for non-U.S. investors and U.S. tax-exempt investors. The general partner of Fund IV-A Cayman is Solara Offshore GP Ltd., a Cayman Islands exempted company.
Fund IV-B Lux: Solara Digital Partners Fund IV-B (Luxembourg) SCSp. Fund IV-B Lux is a Luxembourg special limited partnership (société en commandite spéciale, or "SCSp") (EIN 98-6241571; Registre de Commerce et des Sociétés ("RCS") number B 248193). Its registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund IV-B Lux has a fund size of approximately €1.15 billion (approximately $1.24 billion at the assumed exchange rate of 1.08 EUR/USD). The general partner (associé commandité) of Fund IV-B Lux is Solara Luxembourg Management S.à r.l., a Luxembourg private limited liability company (RCS B 248194).
Fund V-A Cayman: Solara Digital Partners Fund V-A (Cayman) LP. Fund V-A Cayman is a Cayman Islands exempted limited partnership (EIN 98-7891234) registered with CIMA under registration number MF-89103. Its registered office is located at Harborstone Corporate Services Ltd., George Town, Grand Cayman, Cayman Islands. Fund V-A Cayman has a fund size of approximately $2.45 billion and, like Fund IV-A Cayman, serves as a parallel fund vehicle for non-U.S. and U.S. tax-exempt investors.
Fund V-B Lux: Solara Digital Partners Fund V-B (Luxembourg) SCSp. Fund V-B Lux is a Luxembourg SCSp (EIN 98-7891267; RCS B 271056). Its registered office is located at 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg. Fund V-B Lux has a fund size of approximately €1.38 billion (approximately $1.49 billion at the assumed exchange rate of 1.08 EUR/USD).
C. Prior Steps in the Reorganization (Steps 1–4)
The proposed reorganization of Solara's fund platform consists of five sequential steps. Steps 1 through 4 precede the Step 5 distributions that are the subject of this memorandum. Each of Steps 1 through 4 is the subject of its own companion memorandum or memoranda, which analyze the applicable Code provisions in detail. The following summary provides the necessary factual context for the § 731 analysis of Step 5.
Step 1 (Target Effective Date: September 15, 2025). In Step 1, Solara will form the following new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the Consolidated Master Fund; (ii) Solara Consolidated Master Fund LP, a Delaware limited partnership (the "Consolidated Master Fund" or "Master Fund"), which will serve as the central investment vehicle in the reorganized master-feeder structure; (iii) Solara International Feeder (Cayman) LP (the "International Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. Each of these entities will file IRS Form 8832 (Entity Classification Election) to elect classification as a partnership for U.S. federal income tax purposes under Treasury Regulations Section 301.7701-3.
Step 2 (Target Effective Date: October 1, 2025). In Step 2, Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund. The aggregate fair market value ("FMV") of the contributed assets is approximately $2.31 billion, and the aggregate adjusted tax basis of such assets is approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. This contribution is intended to qualify for tax-free treatment under IRC § 721(a), as analyzed in the companion Tax Memorandum — IRC § 721(a) Contribution Analysis.
Step 3 (Target Effective Date: October 15, 2025). In Step 3, Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund. The aggregate FMV of the contributed assets is approximately €1.07 billion ($1.16 billion), the aggregate adjusted tax basis is approximately €782 million ($844.6 million), and the aggregate built-in gain is approximately €288 million ($311 million). This contribution is likewise intended to qualify for tax-free treatment under IRC § 721(a).
Step 4 (Target Effective Date: November 1, 2025). In Step 4, both Fund V-A (Cayman) LP and Fund V-B (Luxembourg) SCSp will contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for limited partnership interests in the Consolidated Master Fund. Fund V-A Cayman's contributed assets have an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and aggregate built-in gain of approximately $550 million. Fund V-B Lux's contributed assets have an aggregate FMV of approximately €1.29 billion ($1.39 billion), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and aggregate built-in gain of approximately €150 million ($162 million). The same § 721(a) nonrecognition treatment applies to both contributions.
D. Step 5 — The Distributions at Issue
Step 5 is the transaction that is the subject of this memorandum. The target effective date for Step 5 is December 1, 2025.
Following the completion of Steps 2 through 4, each Legacy Offshore Vehicle's sole remaining asset will be a limited partnership interest in the Consolidated Master Fund LP. Each Legacy Offshore Vehicle will have contributed all of its portfolio assets (including equity interests in portfolio companies, intercompany receivables, and related assets) to the Consolidated Master Fund in the prior steps, and no other material assets will remain in any Legacy Offshore Vehicle at the time of Step 5.
In Step 5, each Legacy Offshore Vehicle will dissolve in accordance with its governing agreements and applicable law (either Cayman Islands law or Luxembourg law, as applicable) and will distribute its interest in the Consolidated Master Fund LP to its existing LPs in a liquidating distribution. Upon completion of the distributions, each Legacy Offshore Vehicle will be wound up and will cease to exist as a legal entity.
Following the receipt of the distributed Consolidated Master Fund LP interests, the LPs of the dissolving Legacy Offshore Vehicles will migrate into the appropriate feeder vehicles as follows:
Non-U.S. LPs — Non-U.S. limited partners will contribute their received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP, which will hold an interest in the Consolidated Master Fund and will serve as the vehicle through which non-U.S. investors access the platform going forward.
U.S. Tax-Exempt LPs — U.S. tax-exempt limited partners will contribute their received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP, which will hold an interest in the Consolidated Master Fund and will provide mitigation of unrelated business taxable income ("UBTI") concerns through the use of the feeder structure.
U.S. taxable investors are not directly affected by Step 5 because they hold their interests through the existing domestic vehicles — Fund IV LP (EIN 85-2103748) and Fund V LP (EIN 88-3467219) — which co-invest alongside the Consolidated Master Fund and are not subject to dissolution in this reorganization.
E. Representative Limited Partners Affected by Step 5 Distributions
The following representative LPs are among those affected by the Step 5 distributions and are identified here to illustrate the application of the § 731 analysis to specific investor categories:
Nordhaven Sovereign Wealth Fund. Nordhaven Sovereign Wealth Fund is a sovereign wealth fund of the Kingdom of Nordhaven, a non-U.S. sovereign entity. The primary contact is Anders Bjørkman. Nordhaven SWF has committed $380 million to Fund IV-A Cayman and $500 million to Fund V-A Cayman. As a non-U.S. investor, Nordhaven SWF will roll into Solara International Feeder (Cayman) LP following receipt of its Step 5 distributions.
Kestrel Pacific Insurance Group. Kestrel Pacific Insurance Group is a Singapore-domiciled non-U.S. insurance company. The primary contact is Christine Leung. Kestrel Pacific has committed €200 million to Fund IV-B Lux and €275 million to Fund V-B Lux. As a non-U.S. investor, Kestrel Pacific will roll into Solara International Feeder (Cayman) LP.
Pinnacle State Employees' Retirement System. Pinnacle State Employees' Retirement System ("Pinnacle SERS") is a U.S. public pension fund. The primary contact is Margaret Faulkner, Chief Investment Officer. Pinnacle SERS has committed $275 million to Fund IV and $340 million to Fund V. As a U.S. tax-exempt investor, to the extent that Pinnacle SERS holds interests through the Cayman parallel vehicles, it will roll into Solara Tax-Exempt Feeder (Cayman) LP following receipt of its Step 5 distributions.
Grandview University Endowment. Grandview University Endowment is a Massachusetts-based U.S. tax-exempt endowment. The primary contact is Harold Kingsley. Grandview has committed $120 million to Fund IV and $185 million to Fund V. As a U.S. tax-exempt investor, Grandview will receive similar treatment to Pinnacle SERS and will roll into Solara Tax-Exempt Feeder (Cayman) LP.
F. Aggregate Financial Data Relevant to Step 5
The following aggregate financial data summarizes the portfolio assets originally contributed to the Consolidated Master Fund in Steps 2 through 4 and provides relevant context for the Step 5 distribution analysis:
The following representative portfolio companies illustrate the composition of the contributed assets and the magnitude of built-in gain that will be preserved through the § 704(c) carryover provisions at the Consolidated Master Fund LP level:
The aggregate liabilities of $1.34 billion assumed by the Consolidated Master Fund in Steps 2 through 4 are the subject of a separate and detailed analysis in the companion Tax Memorandum — IRC § 752 Liability Shifting Analysis (the "§ 752 Memorandum"). The interaction of § 752 liability shifts with the § 731 distribution analysis is addressed in Section V.E below.
G. Business Rationale for the Reorganization
The proposed five-step reorganization serves several substantial, non-tax business purposes, which provide independent significance to the transaction and support the conclusion that the anti-abuse provisions of the Code and Treasury Regulations should not be applied to recharacterize any step of the reorganization.
First, the reorganization is expected to result in operational cost reduction of approximately $3.8 million annually through the elimination of duplicative offshore administration, audit, regulatory filing, and legal compliance costs associated with maintaining four separate offshore fund vehicles in two jurisdictions. The existing parallel vehicle structure requires separate annual audits by Caldwell Pierce & Co. LLP (or its local affiliates) for each offshore entity, separate regulatory filings with CIMA and the Commission de Surveillance du Secteur Financier ("CSSF"), and separate administrator agreements with Harborstone Corporate Services Ltd. and Luxembourg-based administration providers.
Second, the OECD Pillar Two Global Anti-Base Erosion ("GloBE") rules have become effective for Luxembourg entities beginning with fiscal year 2025. These rules have substantially diminished the historical benefits of utilizing the Luxembourg SCSp structure, as the GloBE rules may impose a top-up tax on constituent entities that do not meet the minimum effective tax rate of 15%. The reorganization eliminates the Luxembourg SCSp vehicles and thereby simplifies the platform's exposure to the GloBE rules.
Third, the reorganization will result in simplified compliance with the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS"), as the number of reporting entities will be reduced from six parallel vehicles to a single master fund with two feeder vehicles.
Fourth, the reorganization reflects LP-requested governance simplification. The Limited Partner Advisory Committee ("LPAC") has expressed a preference for a simplified structure that reduces the number of entities and streamlines reporting and communications. Preliminary LPAC consent for the reorganization was obtained at the April 22, 2025 LPAC meeting, with 78% in interest voting in favor.
H. Entity Classification
Each of the four Legacy Offshore Vehicles is classified as a partnership for U.S. federal income tax purposes. Fund IV-A Cayman and Fund V-A Cayman are Cayman Islands exempted limited partnerships that are treated as partnerships under the default classification rules of Treasury Regulations Section 301.7701-3(b)(2)(i) (applicable to eligible entities with two or more members that are formed outside the United States). Fund IV-B Lux and Fund V-B Lux are Luxembourg SCSp entities that are likewise treated as partnerships for U.S. federal income tax purposes under the same default classification rules.
The Consolidated Master Fund LP has elected, or will elect, partnership classification for U.S. federal income tax purposes under Treasury Regulations Section 301.7701-3 by filing IRS Form 8832. The International Feeder and the Tax-Exempt Feeder have likewise elected, or will elect, partnership classification by filing Form 8832.
A detailed entity classification analysis for each of the entities in the reorganized structure is provided in the companion Tax Memorandum — Entity Classification Under Treas. Reg. § 301.7701-3. For purposes of this memorandum, we assume and rely upon the conclusion that each of the Legacy Offshore Vehicles and each of the new entities is properly classified as a partnership for U.S. federal income tax purposes.
III. ISSUES PRESENTED
This memorandum addresses the following issues arising under IRC § 731 in connection with the Step 5 distributions:
1. Whether the distributions by each Legacy Offshore Vehicle of its partnership interest in the Consolidated Master Fund LP to its LPs in dissolution and liquidation are treated as tax-free distributions under IRC § 731(a)(1), resulting in no gain recognition to the distributee LPs.
2. Whether any gain or loss is recognized by the distributing partnerships (i.e., the four Legacy Offshore Vehicles) under IRC § 731(b) as a result of the Step 5 distributions.
3. Whether the distributed Consolidated Master Fund LP interests could be treated as "money" under IRC § 731(a)(1) or otherwise trigger gain recognition to the distributee LPs under any provision of the Code.
4. Whether the distributed Consolidated Master Fund LP interests constitute "marketable securities" treated as money under IRC § 731(c), which would potentially require gain recognition by the distributee LPs. This issue is the subject of a cross-reference to the companion § 731(c) Memorandum.
5. Whether the Step 5 distributions constitute liquidating distributions or current distributions for purposes of Subchapter K, and the applicable analytical framework for determining basis and gain or loss consequences.
6. The interaction of IRC § 731 with IRC § 752 liability shifts occurring as a result of the dissolution of the Legacy Offshore Vehicles. This issue is the subject of a cross-reference to the companion § 752 Memorandum.
IV. SHORT ANSWERS
1. Yes. The Step 5 distributions are tax-free under IRC § 731(a)(1). No gain is recognized by the distributee LPs because the LPs receive property other than money (i.e., limited partnership interests in the Consolidated Master Fund LP), and the IRC § 731(c) marketable securities exception does not apply to treat the distributed partnership interests as money. No loss is recognized under § 731(a)(2) because the LPs receive property other than money, unrealized receivables, and inventory items.
2. No gain or loss is recognized by the distributing partnerships. Under IRC § 731(b), no gain or loss shall be recognized to a partnership on a distribution to a partner of property, including money. This rule applies to each of the four Legacy Offshore Vehicles distributing its Consolidated Master Fund LP interest to its LPs in liquidation.
3. No. The Consolidated Master Fund LP interests are "property" within the meaning of IRC § 731, not "money." They are not treated as money under any provision of the Code other than IRC § 731(c), and, as set forth in the response to Issue 4 below, § 731(c) does not apply.
4. No. The Consolidated Master Fund LP interests are not "marketable securities" under IRC § 731(c)(2) because they are not traded on an established securities market, are not listed on any national securities exchange, are not regularly quoted on any interdealer quotation system, and are subject to substantial transfer restrictions under the Consolidated Master Fund's limited partnership agreement. A detailed analysis of the § 731(c) question is provided in the companion § 731(c) Memorandum.
5. Liquidating distributions. Because each Legacy Offshore Vehicle is dissolving and distributing all of its remaining assets (consisting solely of its Consolidated Master Fund LP interest) to its LPs, the Step 5 distributions constitute liquidating distributions of each LP's entire interest in the applicable Legacy Offshore Vehicle. Accordingly, the basis of the distributed Consolidated Master Fund LP interest in the hands of each distributee LP is determined under IRC § 732(b) — that is, the LP's basis in the distributed property equals the LP's adjusted basis in its partnership interest in the dissolving Legacy Offshore Vehicle, reduced by any money received (which is zero in this case).
6. Liability shifts under § 752 do not alter the nonrecognition conclusion. Although the dissolution of the Legacy Offshore Vehicles will cause liability shifts that produce deemed money distributions under IRC § 752(b), the companion § 752 Memorandum concludes that the netting rules of Treasury Regulations Section 1.752-1(f) prevent any LP from experiencing a net deemed money distribution in excess of its adjusted basis in its Legacy Offshore Vehicle interest. Therefore, no gain is recognized under § 731(a)(1) by reason of § 752 liability shifts.
V. ANALYSIS
A. Statutory Framework — IRC § 731 Overview
1. Section 731(a) — Distribution to Partners
IRC § 731(a) sets forth the general rules governing gain and loss recognition by partners upon distributions of property by a partnership. Section 731(a) provides two operative rules:
Under § 731(a)(1), in the case of a distribution by a partnership to a partner, gain shall not be recognized to the partner except to the extent that any money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution. This rule establishes the foundational principle that distributions of property other than money are generally nonrecognition events under Subchapter K. The rationale for this rule is that a partner's receipt of property from a partnership in which the partner holds an interest is a continuation of the partner's indirect ownership of that property, rather than a realization event. The gain is preserved through the basis rules of § 732 and will be recognized when the partner subsequently disposes of the distributed property in a taxable transaction.
Under § 731(a)(2), in the case of a distribution in liquidation of a partner's interest in a partnership, loss shall be recognized to the partner only if the only property distributed to the partner consists of money, unrealized receivables (as defined in § 751(c)), and inventory items (as defined in § 751(d)). If the partner receives any other property — as is the case here, where the LPs receive partnership interests in the Consolidated Master Fund — no loss is recognized. Instead, the partner's loss, if any, is deferred through the basis mechanics of § 732(b).
The combined effect of §§ 731(a)(1) and 731(a)(2) is that a distribution of property other than money to a partner generally results in no recognition of gain or loss. Gain recognition occurs only when money (or money equivalents, including deemed money under § 752(b) or marketable securities treated as money under § 731(c)) exceeds the partner's outside basis. Loss recognition occurs only in a liquidating distribution where the partner receives solely money, unrealized receivables, and inventory items and the aggregate of those amounts is less than the partner's outside basis.
2. Section 731(b) — No Gain or Loss to Distributing Partnership
IRC § 731(b) provides a simple and absolute rule: no gain or loss shall be recognized to a partnership on a distribution to a partner of property, including money. This provision applies to the partnership level and is not subject to any of the exceptions that apply at the partner level (e.g., the money-exceeds-basis exception of § 731(a)(1) or the marketable securities rule of § 731(c)).
The § 731(b) nonrecognition rule applies regardless of whether the distribution is a current distribution or a liquidating distribution, and regardless of whether the distributed property has a fair market value in excess of its adjusted basis in the hands of the distributing partnership. The rationale for § 731(b) is that a partnership distribution is not a sale or exchange by the partnership, but rather a division of partnership property among the partners who already own such property indirectly through their partnership interests. Any built-in gain in the distributed property is preserved through the basis rules of § 732 and is recognized at the partner level upon a subsequent disposition.
Application to Step 5: Each Legacy Offshore Vehicle recognizes no gain or loss when it distributes its Consolidated Master Fund LP interest to its LPs in liquidation. This result holds even though the distributed Consolidated Master Fund LP interests reflect substantial built-in gain in the underlying portfolio assets (an aggregate of $1.72 billion across all four vehicles). The built-in gain is preserved through the § 704(c) carryover provisions at the Consolidated Master Fund LP level, as analyzed in the companion Tax Memorandum — IRC § 704(c) Built-In Gain Carryover.
3. Section 731(c) — Marketable Securities Treated as Money
IRC § 731(c), enacted as part of the Revenue Reconciliation Act of 1994 (Pub. L. No. 103-465, § 741), provides a significant exception to the general nonrecognition rule of § 731(a)(1). Under § 731(c)(1)(A), for purposes of § 731(a)(1) and § 737, the term "money" includes marketable securities. This means that if a partnership distributes marketable securities to a partner, the distribution is treated as a distribution of money to the extent of the fair market value of the securities at the time of the distribution, potentially triggering gain recognition to the distributee partner.
Section 731(c)(2) defines "marketable securities" as financial instruments (including stocks, bonds, notes, and other financial instruments specified by the Secretary) that are, as of the date of the distribution, "actively traded" within the meaning of § 1092(d)(1). Under § 1092(d)(1), a financial instrument is "actively traded" if it is traded on (or subject to the rules of) a national securities exchange that is registered under Section 6 of the Securities Exchange Act of 1934, a board of trade designated as a contract market by the Commodity Futures Trading Commission, or any other market that the Secretary determines has rules adequate to carry out the purposes of Section 1092. Section 731(c)(2)(B) further extends the definition to include interests in entities that are actively traded, certain interests in common trust funds and regulated investment companies, and any financial instrument that is convertible into, or exchangeable for, such instruments.
The question presented in this memorandum is whether the Consolidated Master Fund LP interests could be treated as "marketable securities" under § 731(c)(2). Our preliminary conclusion, which is supported in greater detail in the companion § 731(c) Memorandum, is that the Consolidated Master Fund LP interests are not marketable securities. This conclusion rests on the following factors:
(a) The Consolidated Master Fund LP interests are not listed on any national securities exchange, including the New York Stock Exchange ("NYSE"), the Nasdaq Stock Market, or any other exchange registered under Section 6 of the Securities Exchange Act of 1934.
(b) The Consolidated Master Fund LP interests are not regularly quoted on any interdealer quotation system.
(c) The Consolidated Master Fund LP interests are not actively traded on any established secondary market.
(d) The Consolidated Master Fund LP interests are subject to extensive transfer restrictions under the Consolidated Master Fund's limited partnership agreement, including requirements for general partner consent, minimum hold periods, and compliance with applicable securities law exemptions.
(e) The Consolidated Master Fund LP interests are held by a limited group of institutional and professional investors and are not offered to the general public.
Because the § 731(c) exception does not apply, the Consolidated Master Fund LP interests are not treated as "money" for purposes of § 731(a)(1), and the distributions of such interests do not trigger gain recognition. The companion § 731(c) Memorandum provides a comprehensive analysis of this issue, including a discussion of the legislative history of § 731(c), the applicable Treasury Regulations (Treas. Reg. § 1.731-2), and relevant administrative guidance.
B. Characterization of the Step 5 Transactions
1. Nature of the Distributions — Liquidating vs. Current
The distinction between a current distribution and a liquidating distribution is significant under Subchapter K because different basis rules apply. In a current distribution, the basis of distributed property in the hands of the distributee partner is determined under § 732(a), which provides that the partner's basis in the distributed property equals the distributing partnership's adjusted basis in such property immediately before the distribution, but not in excess of the partner's adjusted basis in the partnership interest reduced by any money received. In a liquidating distribution, by contrast, the basis of distributed property is determined under § 732(b), which provides that the partner's basis in the distributed property equals the partner's adjusted basis in the partnership interest, reduced by any money received.
Under the facts presented, each Legacy Offshore Vehicle is dissolving in full. All portfolio assets of each Legacy Offshore Vehicle have been contributed to the Consolidated Master Fund in Steps 2 through 4. As of the target effective date for Step 5 (December 1, 2025), the sole remaining asset of each Legacy Offshore Vehicle will be its limited partnership interest in the Consolidated Master Fund. Each Legacy Offshore Vehicle will distribute that interest to its LPs and then wind up and dissolve.
The Step 5 distributions therefore constitute liquidating distributions of each LP's entire interest in the applicable Legacy Offshore Vehicle. The applicable basis provision is § 732(b), not § 732(a). In a liquidating distribution, the basis of the distributed property in the hands of the distributee partner is substituted to equal the partner's adjusted basis in its partnership interest (reduced by any money received), regardless of the distributing partnership's basis in the distributed property. This ensures that no gain or loss is recognized at the time of the distribution and that the partner's investment in the partnership is fully accounted for through the basis in the distributed property.
The classification of the Step 5 distributions as liquidating distributions is consistent with the treatment described in Treasury Regulations Section 1.731-1(a)(1), which provides that distributions are treated as liquidating distributions when a partner receives distributions in complete liquidation of the partner's entire interest in the partnership.
2. Property vs. Money Characterization
The critical threshold question under § 731(a)(1) is whether the distributed item is "money" or "property." If the distributed item is property (other than money or marketable securities treated as money), no gain is recognized to the distributee partner, regardless of the fair market value of the distributed property.
The Consolidated Master Fund LP interests distributed in Step 5 are limited partnership interests in a Delaware limited partnership. Partnership interests are "property" within the meaning of § 731 and the broader Code. They are not "money" under general federal income tax principles. The term "money" as used in § 731(a)(1) refers to cash, checks, demand deposits, and other items that constitute a medium of exchange or legal tender. Partnership interests, by contrast, are equity interests in a legal entity and are universally recognized as "property" for federal income tax purposes.
This characterization is not altered by the fact that the Consolidated Master Fund LP interests have substantial value. The aggregate fair market value of the assets underlying the four Consolidated Master Fund LP interests distributed in Step 5 is approximately $7.75 billion. However, the value of distributed property is irrelevant under § 731(a)(1); what matters is whether the distributed item is money or property. Because the Consolidated Master Fund LP interests are property, not money, the threshold condition for gain recognition under § 731(a)(1) is not satisfied.
The distribution of a partnership interest by a partnership is specifically contemplated by Subchapter K and has been the subject of numerous revenue rulings, private letter rulings, and administrative pronouncements confirming that such distributions are treated as distributions of property subject to the general nonrecognition rules of § 731. The distribution of a partnership interest in one partnership by another partnership does not present any novel or unusual issue under § 731; it is a routine transaction in the context of tiered partnership structures, and the tax consequences are well-established.
C. Application of § 731(a)(1) — No Gain Recognition to Distributee LPs
1. No Money Distributed
The sole property distributed by each Legacy Offshore Vehicle to its LPs in Step 5 is a limited partnership interest in the Consolidated Master Fund LP. No cash, checks, demand deposits, or other items constituting "money" within the meaning of § 731(a)(1) are distributed as part of Step 5. The Legacy Offshore Vehicles will not make any cash distributions, declare any dividends (the partnership equivalent), or distribute any property other than the Consolidated Master Fund LP interests.
Because no money is distributed, the threshold condition for gain recognition under § 731(a)(1) — that money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution — is not met. The amount of "money" distributed is zero, and zero cannot exceed any positive adjusted basis amount. Accordingly, no gain is recognized to any distributee LP under § 731(a)(1) by reason of the Step 5 distributions.
This conclusion is subject to the analysis of two potential exceptions: (a) whether the distributed Consolidated Master Fund LP interests could be treated as "money" under the marketable securities rule of § 731(c), and (b) whether any deemed money distribution arises under § 752(b) as a result of liability shifts incident to the dissolution of the Legacy Offshore Vehicles. Both of these exceptions are analyzed below and are concluded not to apply.
2. Section 731(c) — Marketable Securities Analysis (Summary)
As discussed in Section V.A.3 above, IRC § 731(c) provides that for purposes of § 731(a)(1), the term "money" includes marketable securities. If the Consolidated Master Fund LP interests were "marketable securities" within the meaning of § 731(c)(2), the distribution of such interests would be treated as a distribution of money to the extent of the fair market value of such interests, potentially triggering gain recognition.
The § 731(c)(2)(A) definition of "marketable securities" requires that the financial instrument be "actively traded" as of the date of the distribution. Under § 731(c)(2)(B), an interest in a partnership or other entity is treated as a financial instrument for this purpose, but only if such interest is "actively traded" within the meaning of § 1092(d)(1).
The Consolidated Master Fund LP interests do not satisfy any of the criteria for classification as "marketable securities":
(a) Not listed on a national securities exchange. The Consolidated Master Fund LP interests are not listed on the NYSE, Nasdaq, or any other national securities exchange registered under Section 6 of the Securities Exchange Act of 1934. The Consolidated Master Fund is a private investment partnership, and its interests are offered and sold only to accredited investors and qualified purchasers under exemptions from registration under the Securities Act of 1933.
(b) Not regularly quoted on an interdealer quotation system. The Consolidated Master Fund LP interests are not quoted on OTC Markets, the Vireo Software interdealer quotation system, or any other interdealer quotation system.
(c) Not actively traded on an established secondary market. There is no established secondary market for the Consolidated Master Fund LP interests. While a limited secondary market exists for certain private fund interests (e.g., through specialized intermediaries such as Adriatic Industries or Quillon Securities), no regular or systematic trading in the Consolidated Master Fund LP interests occurs or is expected to occur on any such market.
(d) Subject to substantial transfer restrictions. The Consolidated Master Fund's limited partnership agreement contains extensive transfer restrictions, including the requirement of prior written consent of the general partner for any transfer, assignment, or other disposition of any limited partnership interest. These transfer restrictions are binding on all limited partners and effectively prevent any active trading of the interests.
(e) Held by a limited group of institutional investors. The Consolidated Master Fund LP interests are held by a small group of sophisticated institutional investors, including sovereign wealth funds, pension funds, endowments, and insurance companies. The interests are not offered to the general public and are not marketed on any exchange, trading platform, or quotation system.
Based on these factors, the Consolidated Master Fund LP interests are not "marketable securities" under § 731(c)(2), and the § 731(c) exception does not apply to treat the Step 5 distributions as distributions of money. This conclusion is supported in greater detail in the companion § 731(c) Memorandum, which includes a comprehensive analysis of the applicable statutory provisions, Treasury Regulations (including Treas. Reg. § 1.731-2), legislative history, and administrative guidance.
3. Basis Consequences Under § 732(b)
Because the Step 5 distributions are liquidating distributions (as discussed in Section V.B.1 above), the basis of the Consolidated Master Fund LP interest received by each distributee LP is determined under IRC § 732(b). Under § 732(b), the basis of distributed property received by a partner in liquidation of the partner's interest in a partnership shall be an amount equal to the adjusted basis of such partner's interest in the partnership, reduced (but not below zero) by the amount of any money distributed to the partner.
Because no money is distributed to any LP in Step 5, the basis reduction under § 732(b) for money received is zero. Accordingly, each LP's basis in its Consolidated Master Fund LP interest will equal the LP's adjusted basis in its partnership interest in the dissolving Legacy Offshore Vehicle, determined immediately before the Step 5 distribution. This result ensures the complete continuity of tax attributes: the LP's aggregate investment basis is preserved and transferred from the Legacy Offshore Vehicle interest to the Consolidated Master Fund LP interest without any step-up or step-down (except to the extent required by the § 732(b) substituted basis rule).
The individual basis calculations for each LP will need to be computed on an LP-by-LP basis, taking into account each LP's capital account history, prior allocations of income, gain, loss, and deductions, any prior distributions, and any adjustments arising under § 752 (including deemed contributions and deemed distributions resulting from liability shifts). We have requested the necessary data from Caldwell Pierce & Co. LLP (Helen Okamoto, engagement partner) and expect to receive the LP-by-LP basis schedules in the coming weeks. The companion draft data request outlines the specific information needed for each LP.
4. Holding Period — § 1223(1)
Under IRC § 1223(1), the holding period of property received in a nonrecognition transaction includes the holding period of the property exchanged, provided that the property received has the same basis in whole or in part as the property exchanged, or that the property received was received in a transaction where no gain or loss was recognized. Because the Step 5 distributions are nonrecognition transactions under § 731(a), and because the basis of the distributed Consolidated Master Fund LP interests is determined under § 732(b) by reference to the LP's basis in its Legacy Offshore Vehicle interest, § 1223(1) applies to tack the LP's holding period.
Accordingly, each LP's holding period in its Consolidated Master Fund LP interest received in Step 5 will include the LP's holding period in its partnership interest in the dissolving Legacy Offshore Vehicle. For LPs of Fund IV-A Cayman and Fund IV-B Lux, the tacked holding period traces back to the date of acquisition of each LP's interest in the applicable Fund IV vehicle. The final closing of Fund IV occurred on June 15, 2021, and accordingly the holding period of interests acquired at or before the final close will begin no later than June 15, 2021 (with earlier closes providing correspondingly earlier holding period commencement dates). For LPs of Fund V-A Cayman and Fund V-B Lux, the tacked holding period traces back to the date of acquisition of each LP's interest in the applicable Fund V vehicle. The final closing of Fund V occurred on September 30, 2023.
In all cases, the tacked holding period ensures that the LPs' holding periods in their Consolidated Master Fund LP interests received in Step 5 will exceed one year as of the date of the distribution (December 1, 2025), satisfying the long-term capital gain holding period requirement of § 1222 should any LP subsequently dispose of its interest in a taxable transaction.
D. Application of § 731(b) — No Gain or Loss to Distributing Partnerships
As discussed in Section V.A.2 above, IRC § 731(b) provides an absolute rule that no gain or loss is recognized to a partnership on a distribution of property to a partner. This rule is not subject to any of the exceptions applicable at the partner level (e.g., the § 731(a)(1) money-exceeds-basis exception or the § 731(c) marketable securities rule). The § 731(b) rule applies to both current and liquidating distributions and applies regardless of the fair market value or built-in gain of the distributed property.
Application to Step 5: Each of the four Legacy Offshore Vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — recognizes no gain or loss when it distributes its Consolidated Master Fund LP interest to its respective LPs in the Step 5 liquidating distributions. This result obtains notwithstanding the fact that the distributed Consolidated Master Fund LP interests reflect, in the aggregate, approximately $1.72 billion of built-in gain in the underlying portfolio assets.
The built-in gain is not lost or eliminated as a result of the Step 5 distributions. Rather, it is preserved through the interaction of multiple provisions of Subchapter K. At the Consolidated Master Fund LP level, the built-in gain inherent in the contributed portfolio assets is preserved through the § 704(c) carryover provisions, which ensure that pre-contribution built-in gain is allocated to the contributing partner (or its successor) when the gain is subsequently recognized by the Consolidated Master Fund. The § 704(c) analysis is provided in the companion Tax Memorandum — IRC § 704(c) Built-In Gain Carryover and the companion Tax Memorandum — IRC § 704(c) Remedial Allocation Method Election.
At the LP level, the distributee LPs' bases in their Consolidated Master Fund LP interests (and subsequently in their feeder partnership interests) preserve the LPs' unrealized gain or loss through the substituted basis rules of §§ 732(b) and 722.
E. Interaction with § 752 — Deemed Money Distributions
1. Overview of the § 752 Issue
The dissolution of the Legacy Offshore Vehicles in Step 5 creates a potential § 752 issue that must be analyzed in conjunction with the § 731 distribution analysis. Under IRC § 752(b), any decrease in a partner's share of the liabilities of a partnership, or any decrease in a partner's individual liabilities by reason of the assumption by the partnership of such individual liabilities, is considered a distribution of money to the partner by the partnership. A deemed money distribution under § 752(b) is treated as actual money for purposes of § 731(a)(1), and thus could trigger gain recognition if the deemed distribution exceeds the partner's adjusted basis in the partnership.
When the Legacy Offshore Vehicles dissolve in Step 5, any liabilities of those entities shift. To the extent that a Legacy Offshore Vehicle had liabilities that were shared among its partners under the § 752 allocation rules, the dissolution causes each LP's share of those liabilities to decrease to zero, generating a deemed money distribution under § 752(b). Simultaneously, however, the LPs may experience deemed contributions under § 752(a) by reason of assuming a share of the Consolidated Master Fund's liabilities through their receipt of Consolidated Master Fund LP interests (and subsequently through their feeder partnership interests).
The $1.34 billion in aggregate liabilities assumed by the Consolidated Master Fund in Steps 2 through 4 created liability shifts that were analyzed in connection with those earlier steps. Step 5 creates additional shifts as the Legacy Offshore Vehicles cease to exist as legal entities and their liability allocations terminate.
2. Cross-Reference to § 752 Memorandum
The companion Tax Memorandum — IRC § 752 Liability Shifting Analysis provides a detailed, LP-by-LP modeling of the $1.34 billion in aggregate liabilities across all partners. That memorandum applies the liability allocation rules of Treasury Regulations Sections 1.752-1 through 1.752-4, including the rules for recourse liabilities (Treas. Reg. § 1.752-2) and nonrecourse liabilities (Treas. Reg. § 1.752-3), to determine each LP's share of liabilities before and after the Step 5 distributions.
The § 752 Memorandum concludes that the netting rules of Treasury Regulations Section 1.752-1(f) prevent gain recognition under § 731(a)(1). Under Treas. Reg. § 1.752-1(f), if, as part of the same transaction (or a series of related transactions), a partner both incurs increases and decreases in the partner's share of partnership liabilities, the deemed contributions and deemed distributions under §§ 752(a) and 752(b) are netted. Only the net amount is treated as a contribution or distribution, as applicable. In the context of Step 5, the LPs' deemed distributions (arising from the termination of their shares of Legacy Offshore Vehicle liabilities) are netted against the LPs' deemed contributions (arising from the assumption of shares of Consolidated Master Fund liabilities through the distributed interests). After netting, no LP experiences a net deemed money distribution exceeding its adjusted basis.
The § 752 Memorandum also applies the tiered partnership rules to account for the fact that, after Step 5, the non-U.S. LPs and U.S. tax-exempt LPs will hold their interests in the Consolidated Master Fund indirectly through the feeder partnerships (International Feeder and Tax-Exempt Feeder). The tiered partnership rules require a look-through analysis to allocate the Consolidated Master Fund's liabilities to the feeder partnerships and then to the ultimate LPs.
The § 752 Memorandum supports Ruling 5 in the PLR request.
3. Summary Conclusion on § 752 Interaction
After application of the netting rules of Treas. Reg. § 1.752-1(f), no LP experiences a net deemed money distribution under § 752(b) that exceeds the LP's adjusted basis in its Legacy Offshore Vehicle interest. Accordingly, the § 752 liability shifts associated with the Step 5 distributions do not cause gain recognition under § 731(a)(1). The nonrecognition treatment of the Step 5 distributions is fully preserved notwithstanding the § 752 interaction.
F. Analysis by Distributing Entity
The following subsections apply the § 731 analysis to each of the four Legacy Offshore Vehicles individually. Although the legal analysis is the same in each case, the entity-by-entity discussion provides the specificity needed for the PLR request and confirms that the conclusion applies to each Legacy Offshore Vehicle separately.
1. Fund IV-A (Cayman) LP
Pre-Step 5 Facts. In Step 2 (target effective date October 1, 2025), Fund IV-A (Cayman) LP contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately $2.31 billion, an aggregate adjusted tax basis of approximately $1.62 billion, and aggregate built-in gain of approximately $690 million. Key portfolio companies contributed by Fund IV-A Cayman include NovaBright Data Systems Inc. (60% interest; $890 million FMV / $520 million basis) and Thorngate Fiber Networks LP (100% interest; $670 million FMV / $490 million basis).
After the completion of Step 2, Fund IV-A Cayman's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP. Fund IV-A Cayman has no other material assets, liabilities, or obligations (other than winding-up obligations under Cayman Islands law) as of the target date for Step 5.
Step 5 Distribution. In Step 5, Fund IV-A Cayman will distribute its Consolidated Master Fund LP interest to its LPs in a liquidating distribution. The LPs of Fund IV-A Cayman include, among others, Nordhaven Sovereign Wealth Fund ($380 million commitment) and various U.S. tax-exempt investors. Each LP will receive a pro rata share of the Consolidated Master Fund LP interest held by Fund IV-A Cayman, determined in accordance with the LP's percentage interest in Fund IV-A Cayman under the fund's limited partnership agreement.
Following the distribution, non-U.S. LPs will contribute their received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP, and U.S. tax-exempt LPs will contribute their received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP.
§ 731(a)(1) Analysis. No money is distributed by Fund IV-A Cayman to any LP. The sole distributed property is the Consolidated Master Fund LP interest, which is "property" and not "money." The § 731(c) marketable securities exception does not apply. Accordingly, no gain is recognized by any distributee LP under § 731(a)(1).
§ 731(b) Analysis. Under § 731(b), Fund IV-A Cayman recognizes no gain or loss on the distribution of the Consolidated Master Fund LP interest to its LPs.
§ 732(b) Basis Consequence. Each LP of Fund IV-A Cayman takes a basis in its received Consolidated Master Fund LP interest equal to the LP's adjusted basis in its Fund IV-A Cayman interest, reduced by any money received (zero).
2. Fund IV-B (Luxembourg) SCSp
Pre-Step 5 Facts. In Step 3 (target effective date October 15, 2025), Fund IV-B (Luxembourg) SCSp contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately €1.07 billion ($1.16 billion), an aggregate adjusted tax basis of approximately €782 million ($844.6 million), and aggregate built-in gain of approximately €288 million ($311 million). The key portfolio company contributed by Fund IV-B Lux is Crestline Cloud Solutions LLC (100% interest; €340 million ($367 million) FMV / €195 million ($211 million) basis).
After the completion of Step 3, Fund IV-B Lux's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.
Step 5 Distribution. In Step 5, Fund IV-B Lux will dissolve and distribute its Consolidated Master Fund LP interest to its LPs, including Kestrel Pacific Insurance Group (€200 million commitment), in a liquidating distribution. Non-U.S. LPs will contribute their received interests to Solara International Feeder (Cayman) LP.
§ 731 Analysis. The § 731 analysis for Fund IV-B Lux is identical in all material respects to the analysis for Fund IV-A Cayman. No money is distributed; no gain is recognized by the distributee LPs under § 731(a)(1); no gain or loss is recognized by Fund IV-B Lux under § 731(b); and each LP's basis in its received Consolidated Master Fund LP interest is determined under § 732(b).
Luxembourg Dissolution. The dissolution of Fund IV-B Lux under Luxembourg law is addressed in the companion Tax Memorandum — Luxembourg Tax Implications of SCSp Dissolution. Veldhuis & Gérard S.à r.l. (Marc Gérard, partner) is advising on local Luxembourg law requirements, including the CSSF notification process and the RCS deregistration procedures applicable to the dissolution of a Luxembourg SCSp (RCS B 248193). The Luxembourg dissolution process does not affect the U.S. federal income tax analysis under § 731, but coordination with local counsel is necessary to ensure that the timing and mechanics of the dissolution are consistent with the representations to be made in the PLR request.
3. Fund V-A (Cayman) LP
Pre-Step 5 Facts. In Step 4 (target effective date November 1, 2025), Fund V-A (Cayman) LP contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately $2.89 billion, an aggregate adjusted tax basis of approximately $2.34 billion, and aggregate built-in gain of approximately $550 million. Key portfolio companies contributed by Fund V-A Cayman include Veridian Edge Computing Corp. (55% interest; $1.12 billion FMV / $780 million basis) and Helix SaaS Holdings Ltd. (100% interest; $445 million FMV / $310 million basis).
After the completion of Step 4, Fund V-A Cayman's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.
Step 5 Distribution. In Step 5, Fund V-A Cayman will distribute its Consolidated Master Fund LP interest to its LPs (including Nordhaven Sovereign Wealth Fund, $500 million commitment, and various U.S. tax-exempt investors) in a liquidating distribution. Non-U.S. LPs will roll into the International Feeder, and U.S. tax-exempt LPs will roll into the Tax-Exempt Feeder.
§ 731 Analysis. The same nonrecognition analysis applies. No money is distributed; no gain is recognized under § 731(a)(1); no gain or loss is recognized by Fund V-A Cayman under § 731(b); and each LP's basis is determined under § 732(b). The analysis is identical in all material respects to the analyses for Fund IV-A Cayman and Fund IV-B Lux.
4. Fund V-B (Luxembourg) SCSp
Pre-Step 5 Facts. In Step 4 (target effective date November 1, 2025), Fund V-B (Luxembourg) SCSp contributed all of its portfolio assets to the Consolidated Master Fund LP. The contributed assets had an aggregate FMV of approximately €1.29 billion ($1.39 billion), an aggregate adjusted tax basis of approximately €1.14 billion ($1.23 billion), and aggregate built-in gain of approximately €150 million ($162 million). The key investor in Fund V-B Lux is Kestrel Pacific Insurance Group (€275 million commitment).
After the completion of Step 4, Fund V-B Lux's sole remaining asset is its limited partnership interest in the Consolidated Master Fund LP.
Step 5 Distribution. In Step 5, Fund V-B Lux will dissolve and distribute its Consolidated Master Fund LP interest to its LPs in a liquidating distribution. Non-U.S. LPs will contribute their received interests to Solara International Feeder (Cayman) LP.
§ 731 Analysis. The same § 731 nonrecognition analysis applies as described above for the other three Legacy Offshore Vehicles.

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

ENGAGEMENT NO.: 20250527-SDILP-PLR

I. EXECUTIVE SUMMARY

II. STATEMENT OF FACTS

III. ISSUES PRESENTED

IV. SHORT ANSWERS

V. ANALYSIS

Record

Parties

Dates

Amounts