CRA indicates that a non-resident estate (using GRE graduated rates), then its NR residuary beneficiaries, could file under s. 216 respecting a Canadian rental property

On the death of a non-resident individual, who had been filing T1 returns pursuant to the s. 216 rules regarding a Canadian rental property, that property was acquired by her non-resident estate at FMV, then was distributed to her two non-resident children (Y and Z - the residuary beneficiaries) as equal co-owners. CRA indicated:

• The non-resident estate can be a graduated rate estate (“GRE”) and the estate is not precluded from filing T3 returns pursuant to s. 216. (“There is no provision in the Act prohibiting an estate filing under section 216 from qualifying as a GRE … [so as to] be taxed at the graduated rates in respect of the net rental income.”)
• S. 107(2) could apply to the distribution of the rental property to the non-resident beneficiaries (“Real … property situated in Canada is … described in subparagraph 128.1(4)(b)(i). Therefore, subsection 107(5) should not apply to deny the tax-deferred rollover of the rental property to Y and Z … .”
• “Provided that the section 216 requirements are satisfied, from the time they acquire beneficial ownership of the property, Y and Z could elect to file under Part I pursuant to section 216 in respect of their share of income derived from the rental property.”

Neal Armstrong. Summary of 2020 STEP Roundtable, Q.13 under s. 216(1) and s. 107(2).