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IRS claims Royce Gracie duped government, owes $1.15 million in back taxes

The 49-year-old may have been conducting some risky business over a three-year period between 2008-2011.

Ethan Miller/Getty Images

You can't fight the government. Plenty of famous fixtures and celebrities, from Martha Stewart to Wesley Snipes, have all tried to pull a fast one on the Internal Revenue Service (IRS) and failed.

Royce Gracie might be a mixed martial arts (MMA) legend, but even he can't find a way around Uncle Sam.

Gracie's alleged wrongdoing began in 2007, where IRS Agent Gloria Ybarra found, through a series of documents, evidence that showed the former held signature authority on a number of international bank accounts. According to a report penned by Bloody Elbow's Paul Gift, the mixed martial arts (MMA) legend didn't disclose foreign back activities between the years 2007-2011.

Ybarra alleges that more than $3 million had been wired into the U.S. from off-shore accounts in Switzerland, Spain, and Abu Dhabi. These monies went towards purchases of vacation properties and paying off credit card debt.

To make matters worse, the Gracies are said to have filed individual tax returns showing minimal taxable income, along with $4,000 child tax and earned income credit claims during the aforementioned three-year span, according to the investigation commissioned by Ybarra.

After originally summoned to appear before the IRS in 2012 to provide bank documents, the Gracies engaged in a back-and-forth battle with the IRS in 2014. Then, on April 1, 2015, Gracies received a smackdown in the form of a Notice of Deficiency, which stated "If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud."

In short, Royce and wife, Marianne, will be paying back a hell of a lot more money than just a few 'G's.' They will be saddled with a 75% penalty for fraud, and the earned income and child tax credits they claimed will be reversed.

The total damages could be over $1 million.

Gracie, along with his wife, are due in tax court on June 6 in Philadelphia to discuss their defense petition and the IRS's Answer, for which they laid out a four-part dossier claiming the Gracies committed fraud and purposefully hid money.

While Gracie's legal issues are in full bloom, the 49-year-old jiu-jitsu ace is slated to face off with Ken Shamrock in a trilogy tilt atop the Bellator 149 card set to take place on Feb. 19, 2016.

For more on that fight card, and to learn more about his training alongside Bellator middleweight striker Joe Schilling, click here and here.

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