Code G is the only correct coding for an IRR.
[Critter-3, code G is used for both taxable and nontaxable direct rollovers other than direct rollovers from a designated Roth account to a Roth IRA which are reportable with code H.]
Code BG would be for a rollover of a designated Roth account in a plan like a 401(k) to another designated Roth account at a different employer. Such a rollover is never taxable, so a Form 1099-R with codes B and G in box 7 and a nonzero amount in box 2a would be bogus. (However, TurboTax will not flag this error and will effectively ignore the code B by treating the transaction as taxable when box 2a is nonzero.)
As you indicated, code 7 is not permitted to be combined with code G and the payer probably should have just used code G.
