If I rolled over my inherited 401(k) to a mutual fund in 2014 and withdrew the entire amount in 2016 do I owe a penalty? If it's an inheritance is it even taxable?

[artglassvisions]

The 1099R from 2014 has 4G in box 7 the 2016 1099R has 4 in box 7.

[Opus 17]

How old are you?  Did you put the money in a regular IRA or an "inherited IRA" (the two things are different).

[Opus 17]

Did you inherit the IRA from a spouse or someone else?

[dmertz · Accepted solution]

The code 4 in box 7 of the 2016 Form 1099-R indicates that the distribution is from an inherited IRA and is therefore not subject to penalty.  It is only subject to ordinary income tax.