Summarizing what NCperson said, if the distribution from the inherited Roth IRA occurred more than 5 years after the beginning of the year for which the decedent first made a Roth IRA contribution, the distribution is a qualified distribution, free of tax and penalty. If the distribution occurred less than 5 years after the beginning of the year for which the decedent first made a Roth IRA contribution, the distribution is subject to the Roth IRA distribution ordering rules for determining taxability (Form 8606 separate from any Form 8606 for your own Roth IRAs) but no penalty applies because the participant died.
