An individual who received a distribution from her qualified retirement plan when she was not yet 59-1/2 years old, was not disabled, and was not eligible for any of the exceptions under Code Sec. 72(t)(2), was responsible for the 10-percent additional penalty tax imposed by Code Sec. 72(t)(1). The court rejected the taxpayer’s claim that the additional tax violated the equal protection component of the Due Process Clause of the Fifth Amendment to the U.S. Constitution.

The court held that Code Sec. 72(t) was valid as applied to the taxpayer, because the age and disability classifications bore a reasonable relationship to a legitimate government purpose. The court reasoned that if taxpayers faced no disincentive for withdrawing amounts from qualified retirement plans long before their retirement years and without suffering any disability, the withdrawn amounts might be diverted to nonretirement uses, which would frustrate Congress’ objective of encouraging taxpayers to save for periods of their lives when they might not be able, or wish, to work. However, allowing a disabled person to receive distributions from such a plan without paying the additional tax was fully consistent with Congress’ objective.

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