In different contexts, tainted income has different meanings. It may refer to passive types of income (passive income/ non-active income) such as interest and certain royalties, dividends and leasing income, income derived from a controlled company which is not distributed before year-end, and income derived from certain related party transactions.
Tainted income may broadly imply sources of income derived from carrying on a business of trading in tainted assets (such as loans, debenture stock, bonds, futures contracts, forward contracts, swaps, etc.)
In a specific context, tainted income denotes “bad income” or income earned from operations in certain low tax jurisdictions (tax havens).
In a broader financial context, tainted income refers to income earned directly or indirectly from dealings in drugs and other prohibited materials, illicit use of precursors or controlled equipment, etc. Generally speaking, tainted income is income illegally earned or income involving fraudulent practices and prohibited means of earning.
