The rental depreciation should stop on the day you decide to convert the investment property into a primary residence. The date of move-in (9/5/24) is likely after the decision was made to cease seeking a buyer.
Yes, you can deduct the expenses related to the sale preparation as it was still considered an investment property at that time. Keep in mind these expenses may be limited because of passive activity loss rules, and the fact that the property wasn't disposed of. If you are in the situation where you have losses, I would suggest reviewing this article: IRS Form 8582: Calculating Passive Activity Losses for Real Estate.
The receipt of due diligence money is considered ordinary income. For this to be reportable as a capital gain on Schedule D, the rental home would need to be a capital asset. The IRS specifically excludes depreciable property from its definition of a capital asset in Section 1221(a)(2). In order to report this in TurboTax, navigate to Federal; Wages & Income. Scroll to the bottom of the page and choose Less Common Income. Lastly, choose Other Reportable Income, then enter a brief description and the amount.
