Let's clarify. You kept the money in an IRA (with the same broker or a rollover to a different broker) but changed the investment strategy? Or you withdrew the money from the IRA and invested it someplace else.
All withdrawals from IRAs are taxable, even if they are inherited, because the original owner never paid tax on the deposits. You don't pay a penalty for early withdrawal, even if you are under 59-1/2, because it was an inherited IRA, but you still pay the income tax. It doesn't matter what you did with the money after. Separately, you will be taxed on any income that your new investments made. You will get a 1099-R from the IRA and you may get a 1099-INT, 1099-MISC, 1099-DIV, 1099-B, or a combination, from the new investment.
You had the option of leaving the funds in the IRA for up to 10 years and withdrawing the money more gradually to spread out the taxes. Depending on the amount and your other income, withdrawing it all at once might have put you into a significantly higher tax bracket this year.
This answer has been verified for accuracy by an Intuit expert employee
