Vacancy may be quite relevant. As with much of our convoluted tax code "it depends". As you mention, if the property is vacant and not held out for rent at the same time it is listed for sale you cannot deduct expenses as rental expenses since the asset is considered Not In Service by the IRS. I have no idea who would ever think that you could credibly try to rent and sell a property up to the closing date, but such are the crazed rules. Check regarding the 266 election. I believe in your case it would only apply to the portion of time the property was unproductive (Out of Service). If that is the whole year for you then yes, I believe your expenses including painting would be capitalized. It makes no difference whether you are painting with the sale in mind. The key is whether the asset is in service. This applies both to the make ready time initially as well as the post in service time. Also bear in mind cost you capitalize ultimately go against capital gains therefore they may be much less valuable than writing off against income. I would suggest minimizing the out of service interval and performing all repairs possible prior to it.
Vacant while listed for sale.
If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property isn’t held out and available for rent while listed for sale, the expenses aren’t deductible rental expenses.
https://www.irs.gov/publications/p527
