Funding IRA-B from SEPP IRA-A

L1: Funding IRA-B from SEPP IRA-AAge 55 (DOB 10-09-1960) retired daughter received her first annual (amortised calculated) existing SEPP plan distribution on Jan 8, 2016 from her one and only IRA-A. Can she fund a new/second IRA-B (with either same or different custodian) via direct transfers from IRA-A to IRA-B, and then take 10% penalized early distributions if needed from IRA-B without busting her IRA-A SEPP?
I’m sure you all must have the answer around here somewhere, but not finding one in time allowed, I’m also sure one of you must have a ready answer off the top without much effort, so thought I’d post the obvious strategy (whether it works or not) for others as well. Thank you.2016-09-28 00:16, By: Nevet, IP: [74.100.46.94]

L2: Funding IRA-B from SEPP IRA-AThis cannot be done once the first SEPP distribution has been taken. Such a transfer would bust the SEPP plan.The following is copied fromRR 2002-62:
(e) Changes to account balance. Under all three methods, substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer of the amount received resulting in such amount not being taxable.
Number ii) is what you asked about. This could have been done prior to the start of the SEPP plan to create a separate account subject to penalty as insurance to avoid busting the SEPP. Of course, that means that the new account amount could not be included in the IRA balance to calculate the annual distribution, making the distribution smaller.
2016-09-28 00:59, By: Alan S, IP: [160.3.87.235]

L3: Funding IRA-B from SEPP IRA-ANo surprise, but thank you for your prompt reply and particularly for your including the source code rules for it.2016-09-28 16:20, By: Nevet, IP: [74.100.46.94]