Tainted element test under GAAR examines tax benefit purpose, arm's length dealings, and abuse of tax law.

The tainted element test under GAAR requires, along with the purpose of obtaining a tax benefit, one or more statutory tainted elements to make an arrangement impermissible. These include non-arm's length dealings, misuse or abuse of tax law, lack of commercial substance, and arrangements carried out in a manner normally not employed for a bona fide purpose. The text explains that transfer pricing principles may be relevant to the first element, and that treaty-shopping structures lacking commercial substance may attract GAAR.

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