How do I tell TurboTax that the distributions received are inherited?

If the distribution is from a pretax retirement account it is taxable whether or not it was inherited. 

You should be able to select that it was inherited in the follow-up questions:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Enter Form 1099-R information and click continue
4. On the "Do any of these situations apply to you?" screen select "I inherited this IRA"