ISO Exercised Strike Price Greater than FMV, flagged as error

[davidadempsey]

In March of 2022, I exercised parts of ISO grants from two different tranches, each tranche having different strike prices e.g. $37 and $137. The grants were more than 5 years old, but sold later in 2022. The FMV of the company's shares for this private company was $127.

TurboTax Desktop is flagging the shares from the 137 tranche as an error, because it insists that my exercise price shouldn't be greater than FMV.

This is exactly what my company permitted and what my documentation reports. How do I work around this "error" so that I can continue my return?

Stock sold later in 2022 at much higher price than FMV. Might be important information.

[GeorgeM777]

You might consider reporting the ISO transaction that is producing the error as a regular stock trade.  Given that your strike price was greater than the FMV on the date of exercise, and if your sale was a disqualified disposition, then you don't have to report any part of gain as ordinary income.  If your sale was a qualified disposition, you report your gain as a capital gain as no part of that gain needs to be reported as ordinary income.  In either scenario, it seems you are just reporting the gain as a capital gain.  Thus, reporting the sale as a regular stock trade should eliminate the error.  In other words, report your basis (strike price) and your sale proceeds, along with your holding period.

@davidadempsey 

[davidadempsey]

There's no stock symbol as it's a private company. You can leave that blank?

[GeorgeM777]

Even though the company does not have a stock symbol, you can abbreviate the name of the company.  Don't leave the field blank as TurboTax will likely identify the missing information as an item that needs to be addressed.

@davidadempsey