You are correct about the information in IRS Pub 504 indicating that when you transfer interests in non-statutory stock options and non-qualified deferred compensation you don’t include any amount in gross income upon the transfer. But it sounds like you exercised the options and took the deferred compensation. You can't enter a transaction like that in TurboTax. The stock options and/or deferred compensation should have been made available by your employer to/paid to your former spouse, who would then be responsible for paying the tax. You cannot transfer tax withholding to another person. If your employer made payouts directly to you, they are obligated to report it as compensation to you and withhold the appropriate payroll tax. If the options were made available to, and the deferred comp paid to your former spouse, then you should have your employer correct your W-2.
