That a QCD can be made from an inherited IRA is not exactly common knowledge. Perhaps the IRS examiner was unaware that a QCD can be made from an inherited IRA and mistakenly treated the code-4 distribution as ineligible to be a QCD. Worldwide professionals Wolters Kluwer whose business it is to provide guidance in tax and accounting apparently had that wrong in their published guidance around 10 years ago despite there being explicit guidance from the IRS in Notice 2007-7 Q&A 37 that QCDs are permitted to be made from an inherited/beneficiary IRA. QCDs first became permissible in 2006, so QCDs have always been permitted to be made from inherited/beneficiary IRAs if the beneficiary is age 70½ or over.
The QCD does need to be reported on your tax return with the "QCD" notation. TurboTax does that for you when entered as rjs described. Nothing on the Form 1099-R indicates that its a QCD.
