@mrmood6007 - while I won't answer this directly, I will try to simplify for others who post..
If the purchase price was $535k and the gift was $150k, then the loan was $385k.
While the loan was actually $396k and you state that the $11k difference was for title (which adds to the cost basis), escrow (the agent or atty which adds to the cost basis), insurance reserves (which do NOT add to the cost basis) and property tax reserves (which do NOT add to the cost basis).
what do you think the cost basis is based on the reference you provided. Note there is no reference to the loans in this definition:
The Greater of:
(i) The amount paid by the transferee for the property, or
(ii) The transferor's adjusted basis for the property at the time of the transfer,
