I spent so much time on the first question, I totally forgot about the second one.
2. As I am going through the Louisiana state return, should I use the adjustment for Capital Gain from the Sale of a Business? It seems that I should since selling the house (which I was using as a rental) "would allow the buyer of the assets to continue the business" (i.e., renting it as I did). Quoted passage from Louisiana Revenue Information Bulletin 10-017, as referenced by the TurboTax software. Is this correct?
No. The buyer does not "continue the business". What they do with the property after purchasing it from you is not your concern. Heck, if they choose to raze it to the ground and just let it "sit there" forever, they most certainly can. If they choose to make it their primary residence they most certainly can. If they choose to rent it out, then they start their own entirely new business that has nothing to do with what the property was used for by the previous owner (you).
"would allow the buyer of the assets to continue the business"
You don't get to decide what the buyer does with it. You have absolutely no input on that what-so-ever. It's just like when you go out and buy a used car. For example, if you buy my car directly from me, I have absolutely no say in what you do with the car once it's titled to you. If you decide to run it through a metal chipper and sell it for scrap, I can hem and haw all I want about it. There's nothing I can do because I no longer own the car.
should I use the adjustment for Capital Gain from the Sale of a Business?
Nope. If you made a $30K gain on the sale, then you made a $30K gain on the sale. Now I don't know state taxes. But it's perfectly possible that there could be a deduction the state allows, that the federal government (IRS) does not. For example, the state may allow you to deduct the cost of repairs, thus reducing your taxable gain. (no, LA does not allow that) But the IRS does not allow such a deduction.
It's also feasible that while the IRS allows you to deduct closing costs, the state does not allow that deduction meaning you have a higher taxable gain on your state return, than on the federal return.
But overall, I don't see anything that would allow you to change your taxable gain on your state return, from what it is on your federal return. Just keep in mind I don't "do" state taxes so I have no way of knowing what may or may not apply to your specific and explicit situation.
