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Where to report the money from the transaction ?

I exercised a stock option last year.

The option was such that I was able to do a “cash-less” transaction. Buy the stock at the lower option price and sell it immediately at the higher market value.

On the W-2 I received from that employer, in box 14 they reported the “net” amount I received. Even though this wasn't the actual amount I received because taxes were taken out.

However the brokerage house that performed the transaction sent me a 1099-B, which reported the gross proceeds from the sales. Normally 1099-Bs are reported as capital gains, where you pay taxes on the difference between the cost basis and the gross proceeds. However with a cost basis of $0 you get really whacked.

Either I don't have to report it as capital gains? , because in effect I did pay taxes on it. (This makes me nervous as I did receive that 1099-B)

Or

The cost basis is not zero! But I can't figure out how to calculate what it is?
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