A distribution from a 401(k) retirement account is a taxable event. The taxable amount of the distribution is entered on your tax return as ordinary income and taxed at your current tax return.
What you do with funds received is not relevant unless it is an early distribution subject to a 10% early distribution penalty then the penalty may be waived but not the taxable amount of the distribution.
IRS Tax Topic website for the penalty exclusion from an account not an IRA - https://www.irs.gov/taxtopics/tc558
