Royce Gracie facing $1.15 million tax underpayment to the IRS

By Russell Ess - January 11, 2016

MMA legend Royce Gracie is facing a tough opponent that he cannot beat physically. The man who won UFC 1 is facing a battle with the IRS that claims they have a case with Gracie underpaying his taxes dating back to 2007, according to Bloody Elbow.

IRS agent Gloria Ybarra filed a legal petition to the Gracie and his wife due to an investigation opened up on the case against the Gracies.

To date, my investigation has revealed that during the years 2008 – 2011: 1) the [Gracies] had signature authority over an [sic] foreign bank account at HSBC bank in Switzerland; 2) the [Gracies] had signature authority over a foreign bank account at Caixa Penedes bank in Spain; 3) the [Gracies] had a foreign bank account at First Gulf Bank in Abu Dhabi; and, 4) the [Gracies] did not disclose the full extent of their foreign bank account activities on their U.S. tax returns (Forms 1040) as required by law.

On February 1, 2013, the [Gracies’] attorney sent a letter listing their objections to complying with the summonses. No documents were included with this letter. Among the objections set forth in the letter was a claim that the 2008 year was barred because the IRS had closed its 2008 domestic audit. The [Gracies’] also raised a Fifth Amendment privilege against self-incrimination.

Per Bloody Elbow:

Should the case proceed to trial, it is currently scheduled to take place on Jun. 6 at the U.S. Tax Court in Philadelphia, PA.

The allegations against the Gracies are no laughing matter, not the kind that can be resolved with a simple, “Oops, sorry.” Claims include the use of company funds to pay for personal living expenses, fake personal loans, direct transfers and payments, fake loan documents, and over $3 million in foreign wire transfers, all while allegedly reporting between $0 and $3,925 in annual income tax liability to the U.S. government. These are very serious and specific allegations and there’s no magic submission to hit to make the whole thing go away.

If the IRS’s documents are correct, the Gracies paid woefully little in taxes in 2007-2012 while having a lot of unexplained money floating around in overseas bank accounts.

Bloody Elbow also states that as of Jan. 21, 2014 the IRS had not made a recommendation to the U.S. Department of Justice for criminal prosecution.

Gracie is set to make a return to fighting after nearly nine years at Bellator 149 against fellow MMA legend Ken Shamrock.