One thing to keep in mind is if the stock was an incentive stock option and you hold it for more than one year from the exercise date and two years from the grant date, the entire gain is capital gain, so you don't have to bother with the discount.
Otherwise, you report the discount in the Wages and Income section, then Less Common Income, then Miscellaneous Income, then Other Income not already reported on a W-2 or Form 1099. @munj_umesh
The cost basis for your stock grants would be equal to the income reported on your W-2 form when you acquired it. Divide that amount by the number of shares issued to get the cost per share. Multiply that by the number of shares sold to get the cost basis for the shares sold. @kev103
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