Form 3921 box 3 Exercise Price Per Share is less than box 4 FMV on Exercise Date, TurboTax, Smart Check doesn't like that, but that's what's recorded in my Form 3921?

[jjen2271]

I can't fudge what's reported on my 3921, so how do I make TT happy and get beyond this SmartCheck?

[MarilynG]

The Form 3921 is informational only, so you don't need to enter it in TurboTax.  

When you sell shares, you'll receive a 1099-B and enter it in the Investment Income section. Type '1099b' in the FIND window, then 'Jump to 1099b'.

If your stock is employee stock, your Exercise Price will be less than the FMV, as you receive a discounted price per share.

Click the link for more detailed info on ESPP stock sales.

[jjen2271]

But TT script asks for 3921 information as part of 1099-b ISO script, so I have to enter it. FMV (1.13) is less than Exercise Price (1.50) on the form 3921.

[TomYoung]

It does seem a little strange to exercise an option when the FMV is less than the strike price.

In almost all cases there's absolutely no real "income tax return reporting" reason to use the ISO step by step interview.

Your basis per share is $1.50 and I'd assume there's no effect of the ISO exercise on your W-2.  So simply use the default 1099-B entry form and report the sale that way.  Normally, entering the sale of stock acquired via an ISO using the default 1099-B entry form requires that you adjust the basis reported on the 1099-B, but I'd guess that wouldn't be necessary in this case as I'd think the broker did use that $1.50 per share.

[jjen2271]

The step by step interview isn't the problem - that all works out fine even with the FMV < strike price. It's SmartCheck that raises an error  when FMV < strike price. Even though that may be unusual, it should be acceptable!

[TomYoung]

I don't work for TurboTax, I just try to help.  If the error doesn't prevent you from filing, then forget about it.  If it does, delete the trade and re-enter without using the step by step guidance.

[jamiesonjs]

I have the same issue.  I only have a for 3921 not a 1099-B.  How did you resolve this and get past the smart check?

[jjen2271]

It turned out to be easy: leave the for unchanged, then click "DONE" rather than "rerun smart check".

[TomYoung]

"I have the same issue.  I only have a for 3921 not a 1099-B."

You shouldn't be having the same issue as jjen2271 seemed to be encountering the problem because the 1099-B interview asks for the Form 3921.  Did you enter your Form 3921 in the "ISO Exercise & Hold" interview; is that's what causing the error?

[jamiesonjs]

Yes, I followed the questions for form 3921 and have the error at final review

[TomYoung]

The AMT adjustment is the excess of the FMV at exercise over the exercise price.  I don't believe the excess of the exercise price over the FMV results in a "negative" adjustment to AMT.  I'd say simple delete the entry.

[jjen2271]

Well, ignoring the Smart Check error didn't solve the problem. TT refuses to transmit the return if the FMV is > the exercise price, and I can't get around that. I hesitate to lie about having a form 3921 - this is clearly a TT bug that needs fixing.

[TomYoung]

The whole point of using the "ISO Exercise and Hold" interview is to calculate the necessary AMT adjustment.  You have no AMT adjustment.  Delete the entry.

[jjen2271]

When reporting a 1099-B ISO Stock Sale it's not possible to avoid the 3921 questioning by TT, regardless of the claim "The Form 3921 is informational only, so you don't need to enter it in TurboTax". Note that this is not the same interview as the "ISO Exercise and Hold".

[TomYoung]

In this case you don't have to use the ISO "step by step" process.  Just user the regular 1099-B entry method with the correct "out of pocket" cost.  I'd thank that would be exactly what the broker is reporting.