This distribution is nontaxable. Presumably the Form 1099-R has code J (or possibly code T) in box 7 and the $0 taxable amount must be determined on Form 8606 Part III. To allow TurboTax to prepare Form 8606 properly, after entering the Form 1099-R and answering the immediate follow-up questions, click the Continue button on the Your 1099-R Entries page. When TurboTax asks you to Enter Prior Year Roth IRA Contributions, include the $100,000 rolled over to the Roth IRA from the military death gratuity. The $100,000 is considered to be part of your Roth IRA contribution basis.
