The ISO sale is included in your income. See the TurboTax FAQ below for steps on entering your Form 1099-Misc. Click "See entire answer" for the full page view.
You will also need to report the ISO sale using the information from Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. Your basis will be the exercise price plus any transaction fees paid.
Report your ISO stock sale as an Investment Sale. Enter your sale information under Stocks, Mutual Funds, Bonds, Other.
The bank or brokerage that manages your employer's plan should send you a Form 3921, Exercise of an Incentive Stock Option Under Section 422(b) for any year that you exercise ISOs. This form provides purchase information you'll need for your taxes.
See this TurboTax article Incentive Stock Options more information on the tax implications on the exercise and sale of employer ISOs.
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