If you really like this contractor pushing the cost plus arrangement, just insist on a "not to exceed" amount clearly in the contract (have a contract/construction attorney) do this.

However, she insists she will depreciate SOLELY based on my purchase price of the properties but not the capital improvements unless I show her every receipt for the capital improvements.

I am not sure why they insist she would pay.

No need to make them a formal partner unless they are insisting upon it, in which case you should find out why.

I have done exactly what you all insisted... 

i insisted my name be the first leinholder on the deal but Wendell said the bank is the first the credit partner is the second and im tge third.

You don`t provide ANY value in your post, that I did not even comment on (which is the point @Alexander Felice is making with this one) and insist that you are "still here responding" and "dont want something from it", BUT mock me for responding (with a meme, to a meme posted, not to you) and demand I "add something productive" instead of just calling your BS out?

I need to get to the bottom of why he insists on calling this "rental income".  

Money Mustache's site or heard a podcast with him...I insist you give him a try, at least once.

I haven't done this yet myself, but I've heard of landlords insisting that they pick up the completed application from the prospective tenant at their current place of residence so that they can get an idea of how they live.