From Karen Stilwell, “CRA View – LOI May Engage 251(5)(b)”, Tax Hyperion 12:9 (September 2015):
CRA’s position [in technical interpretation 2014-0552711E5 dated July 7, 2015] on the issue is that the question may only be answered on a case-by-case basis to determine whether a particular LOI constitutes, as required by paragraph 251(5)(b), “a contract, in equity or otherwise”. Careful drafting of LOIs to ensure that they remain non-binding until a binding contract is intentionally concluded remains therefore of utmost importance.
[…]
[I]t would appear that if an agreement to agree to a purchase contract with terms that accord with an LOI constitutes an enforceable “agreement to agree”, what follows may indeed be the application of paragraph 251(5)(b).
