Clearly, you didn't receive a distribution so you don't have to pay taxes on one. I suggest you enter the income as reported on the Form 1099-R, then you enter a negative adjustment to income for the same amount to cancel it out. That way the IRS will see the Form 1099-R listed on your tax return and won't send you a notice asking you to pay tax on it later on.
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the adjustment and the adjustment as a negative number
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