TurboTax's misleading wording is simply asking if the distribution was from an inherited IRA. TurboTax Product Quality has refused to modify this misleading wording. The wording should really say, "Is this distribution reported by brokerage #1 a distribution from an inherited IRA?"
Are your the surviving spouse of the decedent? (I suspect not because you said "we" transferred the IRA.)
The question being asked by TurboTax implies that you received a Form 1099-R from brokerage #1. If the inherited IRA was trustee-to-trustee transferred, brokerage #1 should not have issued any Form 1099-R for the movement of these funds. The Form 1099-R also implies that there was a distribution that was not eligible to be deposited into another inherited IRA. A distribution and rollover between inherited IRAs is not permitted under the tax code.
If this was a proper trustee-to-trustee transfer with the funds in the original inherited IRA paid directly to the inherited IRA at brokerage #2, not paid to you as an intermediary, you'll need to contact brokerage #1 to obtain a corrected Form 1099-R showing that the amount distributed was $0.
You should have received a Form 1099-R from brokerage #2 for the distribution you took from the inherited IRA at brokerage #2.
(On the other hand, if you are the surviving spouse of the decedent and you rolled a distribution from brokerage #1 over to your own IRA at brokerage #2 and then took the decedent's year-of-death RMD from there, that's still problematic but I won't go into details unless I hear that you are the surviving spouse of the decedent.)
