You can't do both. If you exclude the gains, you cannot also take the credit using the same numbers.
It sounds like he qualifies for the credit. If that's the case, he is most likely better off paying taxes on the gains and taking the credit. It seems this is occurring.
You are not required to exclude the gains because you have the 529.
Paying tax on $200 in gains likely has a minimal impact (maybe $20-$30 in extra tax). On the contrary, the credit could be saving him $200.
Take the credit.
