It just dawned on me. I haven't thought about it recently, but it makes no sense to report this distribution as being an HFD. The only reason to treat an IRA distribution as an HFD is to avoid an early-distribution penalty and there is already no early-distribution penalty on a distribution from an inherited IRA. Just report it as a personal HSA contribution and when entering the Form 1099-R do not indicate that any part of the distribution was transferred to an HSA. I would delete and reenter the Form 1099-R to clean everything up.
By reporting it as a regular personal HSA contribution, the deduction for the HSA contribution will offset the addition to income resulting from the distribution from the inherited IRA. Additionally, there will be no HFD testing period to contend with.
