Remember the scrawny kid from Brazil who tore through a lineup of giants and left the world wondering how it was even possible? (If you don’t remember, do yourself a favor and watch the early UFCs.) That same fighter—Royce Gracie—is now a UFC Hall of Famer and was scheduled to step back into the cage after nearly nine years away for a trilogy bout against longtime rival Ken Shamrock in his Bellator promotional debut.
While fight fans focused on Gracie’s return to competition, far fewer realized that he was already locked in another battle—one against a far more seasoned, relentless opponent who can’t be taken down or submitted: the IRS. (Cue boos.)
Gracie’s tax troubles reportedly began in 2012, when both he and his wife received IRS administrative summonses seeking information related to their foreign bank accounts and overseas investment activities. How exactly the Gracies landed on the IRS’s radar remains unclear, but what is known is that the investigation quickly expanded. The IRS requested additional documentation for tax years 2007 through 2011 in order to determine, among other things, potential civil tax penalties.
According to the government, the Gracies met with IRS representatives on April 3, 2014, but failed to produce most of the requested records. That failure prompted the IRS to seek court enforcement, including a motion to hold them in contempt.
Then, on April 1, 2015—ironically April Fools’ Day—the IRS delivered a very serious Notice of Deficiency, alleging the Gracies owed $657,114 in back taxes and an additional $492,835.25 in civil fraud penalties under IRC § 6663(a). That’s a potential 75% penalty layered on top of the tax itself.
Whatever the ultimate resolution, one lesson is crystal clear:
You may be able to submit an opponent, but the IRS always fights back, and the penalty can be a brutal 75%.