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@jnd2546 wrote:

its likely the mortgage company would acknowledge the GOE in their approval

 

and.wouldn't that support that the value of the GOE plus his personal mortgage liability, plus any other down payment comprise his basis for any future sale of the property?

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While I agree that the mortgage company would likely allow the Gift of Equity and he may be able to avoid Mortgage Insurance because of that, you should tell the client to consult the mortgage company about it.  Unless you are an expert in mortgage lending, be careful about telling a client if it is "likely" or not.

The rest of that doesn't matter.  The Regulation says what their Basis is.