If much of the basic basement finishing happened way back when, you probably have, behind the walls, plastic sheeting stretched across the concrete block walls, fiberglass batts stuffed into the rim joist cavities, organic fiberboard insulation lining the plastic, and regular drywall with untreated 2x2's serving as studs, nailed into the concrete masonry block walls with a powder-actuated nailer.

After the stagers left there were big nail holes in the wall, portions of sheetrock facing removed from  stick-on adhesive.

@Bill Hampton nailed itI'm for posting the resources such as books, read first then speak to a profissional CPA so you can understand what's being conveyed.Bigger Pockets has published a The Book on Tax Strategies for the Savvy Real Estate Investor: Powerful techniques anyone can use to deduct more, invest smarter, and pay far less to the IRS. 

Given that you called Lance by the name of Corey, I'd say that you hit the nail on the head when you said "a bit slow on the uptake" ...From what I read, Lance is re-creating what he routinely encounters, and this is not some verbatim exact real-life example.

@Travis Zarelli@Naftali Tolibas has hit the nails on the head. 

I was planning on using 4 x 8 mdf beadboard paneling and gluing/nailing it right over the wallpaper and plaster. 

That's because I had a good size lease and it was fair and reasonable and it included everything under the sun.Here is my page on Damages:What damages can be deducted from your Security DepositDuring the term of this lease or after its termination, the Landlord may charge the Tenant(s) or make deductions from the Security Deposit for any or all of the following: *Repair of walls due to plugs, large nails, or any unreasonable number of holes in the walls including the repainting of such damaged walls.

@Colleen F. hit the nail on the head.

Don pretty well nailed it, detailed partnership financials to show your personal financial position.

@Jaxi West J Scott nailed it, you should use both.