Is 401k inheritance considered income? Will my MGI increase because I took a lump sum distribution of my 401k inheritance?

[Critter-3 · Accepted solution]

Yes it is and Yes it will.   In January you will get a 1099-R for any distributions you took the prior tax year and this must be entered on your personal income tax return.  There will be a code 4 in box 7 which will indicate that this is a distribution due to the death so you will pay regular income tax on it but not pay the 10% penalty for an early withdrawal.