I really don't know what to say about this buggy glitchy thing, if it's happened to anybody else, or if it happens in any other versions than 1.16.5, BUT, what's happened to me three times now in the space of a few days (each time happening on a separate day) is that when I try to move a boat with two cats in it with a water bucket (because the boat was in the way of something I wanted to build), one of the boats would somehow phase down into the ground two blocks deep and the cats would suffocate and die very quickly. I unfortunately don't have any video evidence of this, as it happens very quickly, it's rather unpredictable / doesn't happen every time, and I don't have any screen recording software.
Now, the first time this happened to me, I freaked out because I had no idea what was happening; one of the boats disappeared as well as cat dying sounds were coming from somewhere. I dug where some string popped up out of the ground and sure enough there was the boat, sitting in the second block under the flat grass, so I knew something weird just happened.
The second time it happened, I thought it was some weird glitch if the water passed over the boat at a certain level it would go into the ground, so I tried avoiding that by quickly placing and removing the water source block before the water spread out fully, but that didn't seem to solve the problem as another boat went under and I dug quickly with my efficiency 4 diamond shovel so the cats wouldn't suffocate, but I located them underground a split second too late and I got 5 string in my inventory :')
The third time a boat decided to phase through dirt was again because of this, but I didn't pick up the water bucket in time as I had lagged for only a moment, but that was enough for the water source block to spread out all the way and make another boat to go under. This time however, with that same diamond shovel I speedily dug where they were and I managed to save them both by the skins of their teeth; this third occurrence being what prompted me to report this weird thing. This time though the boat was just in the grass blocks rather than the dirt ones directly below the grass, aka in the first block rather than the second.
I will say though that it didn't happen at any point when I moved villagers in boats several times in the same way, and there was flat grass under them also. I'm thinking that mob size could be something that's related to whatever is at play here, as cats are quite small and villagers are not.
Apologies for the long description btw, I was just thinking about how giving as much detail possible would be beneficial to the potential fixing of the cause.
Please provide some screenshots or videos of this issue occurring whilst the F3 debug screen is enabled.