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Here's another good one: https://www.alvarezandmarsal.com/insights/warning-employee-loans-could-have-adverse-tax-consequences#:~:text=In Technical Advice Memorandum (TAM,the loan%2C for tax purposes.

Seriously, don't guess at this or make assumptions as to how this works. This is a recruiting incentive structured as a loan where it is written off at the end of a designed period if the employee stays with the company. It's an issue that the IRS has challenged because it believes that the "loan" is taxable when given as a compensatory cash advance, and the employer would get the deduction in the year the period ends (in this case, year 3). The complication is exactly how the transaction is set up that will govern when the income is reported. There is case law on this issue also, iirc one of the more recent ones being Morgan Stanley. Here is an older article from The Tax Advisor that discusses the issue and does reference a TAM, but there is more recent case law on this too: https://www.thetaxadviser.com/issues/2011/oct/clinic-story-09.html Here's a blog type article that also describes it and includes some of the advantages and disadvantages of using these employment incentives. https://keepfinancial.com/blog/employee-forgivable-loans-can-be-unforgiving-users-beware The OP should do more research and case law to understand the issue better and not rely on simple, basic answers here as to when it becomes taxable.

Actually the big problem here is that you and your client will have to respond to what his employer does or doesn't do. As both Tom and Dennis have pointed out, the proceeds are more than likely W-2 wages which would be the IRS position in this situation. Will his employer at some point issue a W-2 or a 1099 or even issue anything is the big question?