My wife inherited an IRA from her mother which is to be distributed to her siblings. Is the inherited IRA amount taxable as ordinary income to my wife and I?

Although the distribution is taxed at ordinary income rates you do not pay a penalty if you are under age 59 1/2. 

The amount in the IRA is not taxable income at the time that it's inherited. It doesn't even have to be reported on your wife's tax return. Any money taken out of the IRA is taxable ordinary income to your wife in the year that it is taken out. There are a lot of complicated rules about inherited IRAs, but basically if your wife's mother died in 2020 or 2021, all the money has to be taken out of the IRA within 10 years after your mother-in-law's death, unless there is an unusual situation that would allow an exception.

But what does "to be distributed to her siblings" mean? If your wife and her siblings were all beneficiaries of the IRA, the IRA custodian should have split it up and distributed a separate inherited IRA to each sibling.

If your wife was the only beneficiary, and she inherited her mother's entire IRA, then it's your wife's IRA now, and her siblings are not involved. That might not have been her mother's intent, but if her mother didn't name all the siblings as beneficiaries, she did not properly implement her intent. I don't know of any way to fix it after the fact. If your wife chooses to take money out of the IRA and give it to her siblings as gifts, she can do that. But your wife has to pay tax on any money she takes out of the IRA.