Get your taxes done using TurboTax

I think I finally found my answer. I found the actual tax law, and there was a detail in there that was missing from the irs page linked earlier. It's the part in green, below, which makes clear that the option price is based on the FMV at the start date, even if the FMV goes down and the actual purchase price is based on the FMV at the end date.

Therefore, I believe TurboTax is doing it right (calculation (a)), the (b) calculation in my original post is not a valid calculation, and so my next step is to try to convince my company's payroll that they calculated my ordinary income incorrectly...

Thanks for your help anyway, @GeorgeM777