They buyers agent can also interpret some of the things on there and could have told them that it’s fine or at least do the research on the wire if of the property.

My wife mentioned the same thing with regards to them starting to utilize machine learning to interpret pictures.

Another attorney interpreted the substantial remodel as the Ellis Act where you'd have to demo everything to dust, rebuild it AND give old tenants first right of refusal.

We're only trying to help, but sometimes the message comes out the wrong way or gets interpreted the wrong way. 

Under no circumstances let emotions get you and do anything the tenant can interpret as a self help eviction.

I remember hearing, and I admit this was a number of years ago, that due to the overlapping patchwork of regulations, which sometimes meant even different people within the same local office would interpret/enforce things differently, that some investors had better luck asking or getting an inspection from the state fire marshal.I know it's a long shot, and that information might have changed since I heard it, but I thought there was a small chance it could be helpful anyway.

No, you are completely on target of how I am interpreting wholetailing. 

Its not what was said but what was written down and agreed to, facts trump what was interpreted in a conversation.

Under the second scenario, is there an interpretation where the IRS could say I have now "earned" 50% of the initial equity basis (thus triggering a big tax bill)?

Sure, you could always go back to the written lease and say that it's not in writing, but I find that the estoppel forces everyone to put all their cards on the table - both the seller and the tenant - so they won't be able to try any funny business or "revisionist history" after closing.I find that the existing leases (if any) on properties I purchase are not very "tight" - so there is room for interpretation.