You said that the inherited IRA was rolled over. Don't confuse a trustee-to-trustee transfer of an inherited IRA, which is permitted, with a distribution and rollover, which is not permitted by a non-spouse beneficiary. If a distribution is paid to a non-spouse beneficiary, properly reportable on Form 1099-R with code 4 in box 7 and the IRA/SEP/SIMPLE box marked, that beneficiary is prohibited by law from depositing the funds back into an inherited IRA as a rollover.
It sounds like what happened in this case is that the IRA was actually properly moved by trustee-to-trustee transfer and the originating bank mistakenly reported it as a distribution. This is an extremely common error made by bank representatives because they are rarely properly trained to understand the difference. A trustee-to-trustee transfer is neither a distribution nor a rollover, so it is not reportable. The Ascensus-provided form for moving funds from an IRA has boxes to mark to indicate that the funds are either being distributed or are being transferred, and, in the case of moving an inherited IRA, the bank reps frequently mark the wrong box for you, causing the banking system to issue a Form 1099-R for what actually was a transfer. Every bank rep I have dealt with regarding movement of an inherited IRA has initially made this mistake when filling out this form. I would expect the corrected Form 1099-R from the bank to have zeros in boxes 1 and 2a to indicate that no distribution actually occurred and there is nothing to report of this on your tax return.
