The answers you provided for Form 4972 indicate that you qualify for special 10-year averaging. If your answers are accurate, there should be no concern about using the special 10-year averaging if it produces a lower tax liability. Does the Form 1099-R include code A in box 7? If so, there should really be no concern as long as you did not do a direct rollover to an inherited IRA any of this distribution, which is what you indicated in your answer to question 2.
