The question was in regard to funding an HSA contribution with a distribution from an inherited IRA.
The purpose of an HSA Funding Distribution is to allow IRA funds to be used to fund the HSA contribution without incurring any early-distribution penalty on the distribution from the IRA. Because there is never any early-distribution penalty for receiving a distribution from an inherited IRA, it makes absolutely no sense to incur the restrictions of an HSA Funding Distribution and create the potential for tax and penalty for failure to complete the testing period for the HFD in order to avoid a nonexistent early-distribution penalty. One is FAR better off receiving a taxable distribution from the inherited IRA and using the money to fund a separate deductible HSA contribution. One offsets the other in calculating AGI.
