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Conard v. Commissioner (154 T.C. No. 6)

On March 10, 2020, the Tax Court issued its opinion in Conard v. Commissioner, 154 T.C. No. 6. The issue presented in Conard was whether applying the additional tax imposed by IRC § 72(t)(1) to distributions made to a taxpayer who, at the time of the distributions, was not yet 59-1/2 years old, was not disabled, and was otherwise not eligible for any of the other exceptions described in the IRC § 72(t)(2), violates the equal protection component of the Fifth Amendment’s Due Process Clause.

Additional Tax under IRC § 72(t) – the “Early Withdrawal Tax Penalty”

A taxpayer who receives a distribution from a qualified retirement plan during a taxable year generally must, under the first paragraph of IRC § 72(t), pay, with respect to that year, an additional tax equal to 10% of the taxable portion of the distribution. See IRC § 72(t)(1). Under IRC § 72(t)(2), however, the additional tax does not apply to certain distributions described therein including distributions made to a taxpayer, who is at least 59-1/2 years old or disabled at the time of the distributions. IRC § 72(t)(2)(A)(i) and (iii).

Possible Genesis of Petitioner’s Constitutional Challenge (a/k/a Skip this Part if You Want to Know What Really Happened)

Ms. Sandra Conard (to be known hereafter to history as Petitioner 27571-10), sat at a card table across from Appeals, flanked by Exam, and Counsel. She couldn’t help admiring her youthful (she was not yet 59-1/2) and fit physique (neither was she disabled). She had been in a drawn-out game of poker with the IRS, and she had them on the ropes. Exam’s stack was dwindling. Appeals had a clear tell. Counsel, though, he was stone-faced and cold. Counsel saw Exam’s 10% additional tax assessment. Appeals saw it too, though she hoped Ms. Conard hadn’t seen her left eye twitching as it was wont to do while playing cards. Counsel called. The play was to Ms. Conard.

Ms. Conrad not only saw the 10% additional tax that the IRS had assessed against her, she raised a Fifth Amendment Due Process argument with an equal protection kicker. Exam folded. Appeals thought it was too rich for its blood. Counsel though, with steely gaze and steady hand, called.

Fine, Ms. Conard thought to herself. “I’m all in,” she said. Counsel looked at the card table, and Ms. Conard did not appear to have any more chips. Before Counsel could ask what more she had to offer, she said, “I’m going to represent myself when this goes to court.” Without flinching, Counsel looked at his cards. More confident ever in his pair of deuces than he had ever been, he called. Counsel showed his hand, and Ms. Conard threw her head back and laughed – guffawed even.

She showed her hand: a King, a Jack, a seven, a draw four Uno card, and a Costco membership card. She reached confidently towards the chips, but before she could, Counsel, who admittedly blacked out for a moment, told her not so fast. Judge Toro’s never going to believe this, Counsel thought to himself.

Takeaway – IRC § 72(t)(1)’s “Early Withdrawal Tax Penalty” Does not Violate the U.S. Constitution

Meanwhile, back at the summary of Conard, the Tax Court noted that age is not a suspect classification under the Equal Protection Clause. See Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 83 (2000). Similarly, the court found able-bodied persons are not a suspect class. Interestingly, the Tax Court did not cite any authority for this second conclusion, mostly because the clerk writing the opinion could not find the short or long citation form for common sense.* Because petitioner was not a member of a suspect class, the Tax Court’s review of IRC § 72(t), as applied to the petitioner, is subject to the rational-basis test.

*Author’s Note: If you’re young and able bodied, don’t hang your hat on Due Process arguments to the Code and Treasury Regulations, whippersnappers. For that matter, if you’re old and or have disabilities, it doesn’t look too good for you crippled geezers, either. Id.; see, also, United States v. Harris, 197 F.3d 870, 876 (7th Cir. 1999) (holding that individuals with disabilities are not a suspect or quasi-suspect class) (applying City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (1985)).

The Tax Court observed, with admirable couth, that the Senate forestalled the petitioner’s Due Process argument by observing in the preamble to the published regulations that discouraging withdrawals (absent old-agedness or disability) was for the greater good.

Applying the additional 10% withdrawal tax under IRC § 72(t) to qualified retirement plan distributions the petitioner received in 2008, while she was not yet 59-1/2, was not disabled, and was otherwise not eligible for any of the other exceptions described in IRC § 72(t)(2), does not, therefore, violate the equal protection component of the Due Process Clause of the Fifth Amendment.


First, play poker with Counsel at your own risk. They’re card-sharks.

Second, and more importantly, I should have gone to bed long before I started writing this summary.

Third, by and large, Constitutional arguments are (generally) about as fruitful as a truly frivolous tax argument.

The point I am trying to make was summed up by the Honorable Michael S. Kanne of the Seventh Circuit Court of Appeals in the case of United States v. Sloan, 939 F.2d 499, 499–500 (7th Cir. 1991). Though almost three decades old, Judge Kanne’s words have aged like a fine wine:

Like moths to a flame, some people find themselves irresistibly drawn to [cockamamy tax arguments]. And, like the moths, these people sometimes get burned.

(154 T.C. No. 6) Conard v. Commissioner

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