Start SEPP in January after modifying IRA

L1: Start SEPP in January after modifying IRA
Hi,
Let’s say I plan to start a SEP this January, from IRA #1, but before starting it I roll $40k out of IRA #1 into a new account IRA #2 (for emergency purposes…).
When I calculate the annual SEP amount, the normal instructions are to use the valuation of the account based upon the 12/31 balance of the previous year. In this case, though, the 12/31 balance for IRA #1 would be $40k higher than the actual balance at
the time SEP payments begin in January.
The question is, do I use the 12/31 balance to calculate the annual SEP amount for IRA #1, or do I somehow modify the 12/31 balance to reflect the removal of the $40k ?

2012-01-10 12:22, By: Scott Bar, IP: [204.96.170.173]

L2: Start SEPP in January after modifying IRA
You use the account balance that represents a reasonable valuation based on your facts and ciircumstances… the account balance after the account is divided.
RR 2002-62, Section 2.02(d) Account balance.
The account balance that is used to determine payments must be determined in a reasonable manner based on the facts and circumstances. For example, for an IRA with daily valuations that made its first distribution on July 15, 2003, it would
be reasonable to determine the yearly account balance when using the required minimum distribution method based on the value of the IRA from December 31, 2002 to July 15, 2003. For subsequent years, under the required minimum distribution method, it would
be reasonable to use the value either on the December 31 of the prior year or on a date within a reasonable period before that year’s distribution.
2012-01-10 12:32, By: Gfw, IP: [205.178.73.77]

L3: Start SEPP in January after modifying IRA
Thank you.
Based upon what I am hearing, It would be reasonable to use the value of the IRA #1 on the day after a portion was split off to IRA #2, for example, as long as I started the SEP soon thereafter.
2012-01-10 18:07, By: Scott Bar, IP: [204.96.170.173]

L4: Start SEPP in January after modifying IRA
CLARIFICATION — SEP IRAs ARE DIFFERENT FROM SEPP 72-T PLANS. Be careful of the terminology you are using in your documents, and in your postings.
2012-01-10 19:00, By: dlzallestaxes, IP: [96.227.217.194]

L5: Start SEPP in January after modifying IRA
You are correct. Your account balance time frame is limited due to the transfer. The balance of the IRA account to be used for the plan on the day after the transfer will work fine. You will not be able to use any month end balance
since the transfer wipes out the 12/31 date and you plan to take your first distribution before the end of January. To document your balance on a given day, you will probably have to make a print out off the net of your balance at the close of the next day
or other day before you order your first distribution.
2012-01-10 19:14, By: Alan S., IP: [24.116.66.40]

L5: Start SEPP in January after modifying IRA
Sorry if I confused the terminology.
All the questions that I am asking to relate to taking Substantially Equal Periodic Payments from a rollover IRA, in order to avoid the 10% IRS penalty for early withdrawals before attaining 59 1/2 years of age, which I understand to be a 72(t) exemption.
I am not sure if SEP or SEPP is the correct acronym.
2012-01-10 20:00, By: Scott Bar, IP: [204.96.170.173]

L6: Start SEPP in January after modifying IRA
SEPP = SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (PLAN)
SEP = SIMPLIFIED EMPLOYEE PENSION (PLAN)
2012-01-11 05:29, By: dlzallestaxes, IP: [96.227.217.194]

L7: Start SEPP in January after modifying IRA
Oh, I can see why you were concerned. SEP does not equal SEPP.
2012-01-11 06:02, By: Scott Bar, IP: [204.96.170.173]