Royce Gracie taps out IRS in $1.9 million tax fraud case

Royce Gracie has done it again.

The diminutive Brazilian jiu-jitsu fighter stunned the world when he defeated all challengers to win the first-ever Ultimate Fighting Championship (UFC) tournament back in 1993. He did it again at UFC 2, and then again at UFC 4. No matter how big the opponent, Gracie was able to hang in there and get the win.

And it looks like he did it again against the biggest juggernaut of them all: the Internal Revenue Service (IRS).

The IRS and Gracie have been dueling since 2016, when the organization claimed Gracie evaded more than $1 million in back taxes during the years 2007 to 2012. Not only did Gracie not pay any taxes in those years (despite Gracie owning several dozen jiu-jitsu academies and his wife being a doctor), but he actually received money from the government via Earned Income and Child Tax Credits.

Something didn’t look right about that to the IRS ... and it went digging. And, when the dust settled, the IRS ended up slapping Gracie and his corporation, Khonkhor, with $1,962,222.25 in tax liabilities.

But, Gracie is a fighter, and he didn’t tap out to the IRS. Now after seven long years, a settlement has been reached ... and we’d judge it as a victory for Royce.

The final payment amount owed to the IRS from Gracie? A mere $563,787, roughly a quarter of what was originally sought by the government.

While Gracie was still hit with a fraud penalty on the personal tax liability side, his corporation no longer has fraud penalties. Instead, it has been hit with understatement penalties. All in all, it appears to be a decent result for Gracie, who looked like he was going to get hit hard with the hammer after getting a little too creative with his books.