The case of UTXO came to my head when I heard about some wallet branding some coins as tainted.
They don't brand the wallet address but the UTXO of the received tainted coin.
Say Mr A has 0.1 Btc and received 0.05Btc that is considered tainted
As long as he spent only from the 0.1BTC is transactions remains clean (can be selected manually via coin control, electrum does it)
But if it collects any from 0.05btc no matter how small
It becomes tainted since the new UTXO now has a relationship with the clean one.
This is enough reason for people who care about privacy to avoid using wallets without coin control features. Imagine having your 10BTC Non-KYC coins wrecked by 0.000001 KYC coins in a dusting attack with no coin control to freeze the dust coins.
Many still don't understand how Dangerous dusting attack could be.