Article 406.4 (B) Exception No, 2, 406.4 (D)(2)(b) and (c). The NEC is more definitive than the statement of any electrician. I suspect that the inspector will have difficulty understanding the language. If the inspector was truly worthy of his position, he would already have learned this information of his own volition.

Yes, Bus is right. Make sure you've appropriately marked (the GFCI's often come with labels in the packaging) the protected receptacles with "No Equipment Ground" on all protected receptacles (even the GFCI itself) as well as "GFCI Protected/No Equipment Ground" on any downstream protected receptacles.

Actually both the exception in 406.4(A) and the exception #2 in (B) apply here. I'd highlight both exceptions and the text in 406.4(D)(2). You might be able to get the local electrical inspector to concur which ought to have weight.

If this clown is asking for this he has NO place doing inspections like these.

Thanks for the info. Luckily the electrical inspector let the rental inspector know that it was OK as is. So I did not have to throw the code section at him... thank you all for your help.

My post used the word "volition". While not necessarily incorrect, the better choice would have been "initiative".