Friends, Romans, Countrymen (and women) ...lend me your ears....

So I have a client who received a received as a gift, a principal residence from his parents.  Shortly thereafter (2 months later)  my client sold the property and purchased another home.  As the client did not live in the home or own it for 24 months, he does not meet the eligibility test and therefore cannot take the gain exclusion. 

At this time I am trying to determine the gain on the sale of the gifted property.  To do this I need to determine the basis.  Is the basis the FMV at the date of Gift/transfer, the appraisal value, or the parents original basis?

Much thanks for your help on this guys!

PPECPA