I inherited an IRA from my deceased father. I deposited it in an Inherited IRA. Why is it included in taxable income even though on the 1099 it said zero taxable income?

If you inherit an IRA, the custodian hands over control to you.

There is no deposit involved.

Why do you say deposited ?

@melbill53 

If there is a zero in box 2a, it seems that what was inherited was an account in an employer plan, not an IRA, which was subsequently rolled over to an inherited IRA.  In such a case, the Form 1099-R provided by the payer and the form should have codes 4 and G in box 7 and the IRA/SEP/SIMPLE box unmarked (or codes 4 and H if the account was a Roth account).  The entry of such a Form 1099-R does not add to taxable income.  The amount would be included on Form 1040 line 5a but excluded from line 5b.

If the Form 1099-R instead has the IRA/SEP/SIMPLE box marked (or code T or Q in box 7) indicating a distribution from an IRA, the Form 1099-R reports a distribution paid to you that was not eligible for deposit into an inherited IRA as a rollover.  Non-spouse beneficiaries are not permitted to roll over distributions from inherited IRAs.

I think we need to clarify.

If you inherited an IRA, you could keep it at the original bank or broker, or you could roll it over transfer it  to your own bank or broker, but it must still be considered an "inherited IRA".  The title on the account might be  “John Smith IRA (deceased 11/27/09) F/B/O John Smith, Jr., Beneficiary” or "John Smith Jr. as beneficiary for John Smith Sr."

If this is the case, what are the codes in box 7 of your 1099-R for the rollover transfer?

Or, was it a workplace account that you rolled over transferred to an inherited IRA?  If so, what are the codes?

Or, did you transfer the money from the inherited IRA to a regular IRA in your name?  That is not permitted, and will come with all kinds of problems.