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There should be no current tax liability on the $325,000 if you had the full amount of one tax deferred account transferred into another tax deferred account (i.e. 401(k) to IRA).
If the numeric code in box 7 is a 7 then that indicates it was a normal distribution from some retirement account and that amount will be added to your other income to determine your total tax liability.
If it is a 'normal distribution' then you pay income tax on that amount based upon your filing status, # XXXXX dependents and other allowable adjustments and expenses.
If there is any other code either Alpha or Numeric then penalties may (or may not) apply.
Are you taking distributions from any retirement account?
It will go on line 15 if it is a distribution from an IRA or on line 16 if it from a pension.
From what you have told me it would most likely end up on line 16b and be added to your gross income (line 22 1040), this amount will be reduced by any adjustments (line 37 1040), standard or Schedule A deductions (whicever is greater line 40 1040), and exemptions (line 42 1040) to end up with your taxable income (line 43 1040). Your tax will be calculated from that amount.