However when the investment is dispositioned before maturity, the IRR will not be the same if there is discounted principal.

The purchase cost will absolutely not offset or defer the payment of any depreciation recapture or capital gain taxes from the sale of another asset (unless a specific tax strategy like a 1031 Exchange has been implemented).The sale is treated as a disposition of the asset, and may or may not have tax consequences, and the purchase of the new asset is treated as a new unrelated acquisition.

When the sponsors sell or disposition the property after they have forced the value up by doing updates, increasing the income, decreasing the expenses, etc.; the big value comes.

I would like to discuss it in further detail so as to fully understand the disposition of the project with respect to financing and timeline. 

If they have a disposition list of buyers that buy discounted on market properties, then they will make offers.   

Can I use home depot's receipt (material) as claimed to deduct on the security deposit disposition?

Worked with an agent on disposition side.

Unless you have in writing as to the disposition of the former occupants property you will run the risk of a law suit.  

There may also be the possibility of doing what is called a Partial Asset Disposition (PAD) which would allow the owner to expense the value of what was taken out of the property during the renovation from their depreciation schedule.  

The study could also identify the opportunity to capture additional benefits such as dispositions, and repair and maintenance expenditures.