When box 2a of a code 7D Form 1099-R is blank, by default TurboTax treats the distribution as fully taxable. In the follow-up questions to entering this Form 1099-R, indicate that a different amount is taxable. Select the General Rule, then enter the correct taxable amount.
What you did with the money is irrelevant.
Taxable earnings are distributed before any nontaxable return of premiums. Distributions from a life insurance policy are entirely taxable until the value of your policy is less than the basis in premiums paid and you begin to receive a return of your premiums.
