Are you stating the 1099-R is fraudulent and can prove it?

Yes, he did not get the money, the company lost his entire investment and then sent him a 1099-R as a distribution.

And that $115K was his original investment amount?

Yes that was his full 401k amount and that full amount was invested in 1 company.

Are you asking to deduct it or are you asking to not include it as income?

What would be the correct procedure? I input the 1099-R-but he did not actually receive this money, how do I show that? It was a loss of his entire investment, not a distribution.

I'm guessing we need Paul Harvey to sort this out for us.

If the "old" custodian was told to "invest/distribute" $115K to the "new/scammer" custodian, from "old custodian" perspective they made a distribution and issued a 1099-R.  I won't bet too much that this is what happened, but Phoebe's shiny nickel bet comes to mind.

Could this be a rollover? 

I wouldnt think so, there is no money left.  But again Im not sure of the correct procedure in this case.

What is the code in box 7?

That is why @George4Tacks  is asking about a rollover.

I was thinking indirect rollover. Shyster A distributes $150K to shyster B and issues a 1099R. Shyster B loses all the money and never distributes a 1099R cuz it's all gone. 

https://www.irs.gov/newsroom/help-for-victims-of-ponzi-investment-schemes

Was either shyster investigated by the SEC?  Do a google search for the individual and the SEC.

Code is K, 1

would I choose rollover and when he gets a notice from the IRS explain it all?

Is box 2a filled in or is it empty?

Yes, taxable amount not determined is checked off....

Thank you everyone!