Retirement tax questions

How was Box 7 of your Form 1099-R coded?  You should enter each Form 1099-R exactly as shown.

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received.

However, it depends on what exactly this is.  If it is an annuity purchased from a life insurance company then it is not an insurance payout and it is taxable.  Does it have Code 4 (death) and Code D (Annuity payment)?

If so then this is an annuity purchased from a life insurance company, not a life insurance payout.  And it is taxable income.  These deferred accounts do not get a stepped-up basis on death.  The issuer of the annuity may be able to give you some more detail on this investment.