> Are you saying that I should have imported the 1099 and overridden the basis of those shares to be exactly what the sale price was?
Yeah, you never leave income forms out, you always provide them and correct them if needed. My broker provides a separate, non-standard form with the cost basis for each transaction. Yours may or may not. Once you have the correct cost basis, you provide it on Form 8949 (column E plus code 'B' in column F), which then gets accumulated into Schedule D to provide the true gain/loss for the transactions.
> That seems like an odd thing to expect the end user of tax software to know to do.
Yeah. It's one of those things where I think doing your own taxes is an advantage over using the software. The problem becomes obvious when you understand how income tax works: tax applies to income --> the shares are part of my income, so were taxed as such --> but if cost basis is 0 then the entire sale price will also be considered income --> I'm being taxed twice?? Something is wrong here. The tricky bit is figuring out how to solve it :) But the IRS's instructions are quite thorough, and some googling can point you to the right instructions if it's not obvious where to start.