1. Who is the buyer of the shares on the agreement? The company or Mr. A?
2. If the buyer is Mr. A and Mr.A now becomes a shareholder, then would be quite straight,10k is a taxable gift for Mr.A in that year. This is also simple for the seller in tax treatment. Based on your information, looks fall into this situation.
3. If company is the buyer (redeems the shares) and then re-issue the same shares (or grant option at $0, Mr. A finally becomes the shareholder), accounting treatment is different, and tax consequences would be more complex for the seller, the company and Mr. A.
2. If the buyer is Mr. A and Mr.A now becomes a shareholder, then would be quite straight,10k is a taxable gift for Mr.A in that year. This is also simple for the seller in tax treatment. Based on your information, looks fall into this situation.
3. If company is the buyer (redeems the shares) and then re-issue the same shares (or grant option at $0, Mr. A finally becomes the shareholder), accounting treatment is different, and tax consequences would be more complex for the seller, the company and Mr. A.