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From the instructions to Form 709: The value of a gift is the fair market value (FMV) of the property on the date the gift is made (valuation date). I don't think basis comes into play, unless Series H bonds. Your client will report the current value of the bonds as the gift and report all previously accrued interest on his tax return. While he seems to want to avoid filing a gift tax return (even though it is unlikely any gift tax will be due), the bigger problem is adding all that interest to his income in one year, potentially raising his marginal bracket, taxing more Soc Sec, increased Medicare surcharge, etc. You can crunch those numbers for him and perhaps end up advising him to spread the gift over a few years.

When ownership of a US Savings Bond is transferred, the original owner must report all previously accrued interest on his or her tax return for that year. The new owner must then continue to report the interest that accrues each year. The same rules apply to inherited bonds. From Pub 550: Ownership transferred. If you bought Series E, Series EE, or Series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. The current value of the bonds would be the amount gifted. I'm not sure how you'd calculate basis. Heck, is this guy ever going to reach the $12M lifetime exemption? Just give the daughter the bonds and file a gift tax return. No gift tax owed, and the expense of filing the return will probably be less than looking up the law on basis of gifted bonds and crunching all those numbers.