Sandra M. Conard v. Commissioner, 154 T.C. 6

Petitioner Sandra M. Conard received nine distributions totaling $61,777 from a qualified retirement plan in 2008; she was under 59½, not disabled, and not otherwise excepted under I.R.C. §72(t)(2).
She reported the distributions as income but did not pay the 10% additional tax under I.R.C. §72(t)(1), labeling the tax arbitrary and seeking refunds for prior years.
Respondent issued a notice of deficiency for $6,177 (the 10% additional tax) for 2008; an accuracy-related penalty was later conceded by respondent.
Conard challenged the additional tax as violating the equal protection component of the Fifth Amendment.
The Tax Court, on stipulated facts, applied the rational-basis test because age and disability are not suspect classifications and reviewed Congress’s reasons for §72(t).
The Court held §72(t) rationally furthers the legitimate government purpose of discouraging diversion of tax-favored retirement savings, sustained the deficiency, and denied a refund for 2008.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether applying the §72(t)(1) 10% additional tax to Conard's 2008 distributions violates the equal protection component of the Fifth Amendment	Conard: The statutory exceptions for taxpayers aged 59½ and for the disabled make the tax an arbitrary unequal treatment	Commissioner: Age and disability are not suspect classes; §72(t) discourages early withdrawals and preserves retirement savings, so the classification is rationally related to a legitimate governmental purpose	Court: Applied rational-basis review; classifications are rationally related to legitimate purposes; statute upheld and deficiency sustained

Regan v. Taxation With Representation of Wash., 461 U.S. 540 (legislative latitude in tax classifications; federal due-process clause imposes equal-protection limits)
Kimel v. Florida Bd. of Regents, 528 U.S. 62 (age is not a suspect classification)
McDonald v. Board of Election Com'rs of Chicago, 394 U.S. 802 (courts may conceive reasonable justifications for statutes)
Exxon Corp. v. Eagerton, 462 U.S. 176 (rational-basis standard for economic legislation)
Estate of Kunze v. Commissioner, 233 F.3d 948 (7th Cir.) (summary of rational-basis framework applied to tax statutes)
City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (analysis of scrutiny for disability classifications)
San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1 (tax schemes may have disparate impacts without being unconstitutional)