I do appreciate all responses. I appologize if you feel my question regarding conductor sizing and EGCs is irrelevant because the particular scenario the installation was in does not meet code requirements. It was not my intention to disregard or not acknowledge code, rather i was taking all this helpful information in and continued moving forward. Since I was informed of the proper code requirements, I continued to ask about the proper sizing and number of EGCs for two 240v circuits running to one device because it now will be code compliant. Hope that clears things up. Thanks again guys for all the responses.
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First off, going away from your original questions, you might want to suggest to your customer:
1.) Change the tankless to a gas version rather than the "energy hog" electric version.
2.) Just put an electric tank water heater in.
Now back to your questions.
You never said how the other items in the building were being powered. If there is a panel in there already, is it not large enough to handle the extra load? Or is the feeder to it not large enough?
If it's just the panel then you could change that, but if it's the feeder then you have no choice but to run a larger feeder and increase the size of the subpanel.
Now since you acknowledged that your original proposal was not code compliant, here is another stickler for you. IF there is already a feeder to the building for the other items, you can't run another feeder to it. You're only choice is to pull out/abandon the current feeder and run one large enough for your loads (including your added WH).
Along the same lines, if there is only a branch circuit or MWBC feeding the building, it would also have to be removed/abandoned.
In a "nut shell", to do what you want will require a panel (subpanel) in the building and feeder conductors large enough to carry the load.
As to running your circuit, you only need to run one EGC with the two 40A circuits. And as has been stated, you don't need to increase the size unless you are up-sizing the other conductors.
No GFCI required.