I think it is compensation too. 

A new shareholder has clients from his previous business.  His clients now belong to the S Corp and they pay the S corp.  The shareholder is paid a %. 

• Deferred Compensation (IRC § 61, § 409A)

  • If these payments are intended to compensate the new shareholder for services rendered in connection with transferring clients, they could be treated as compensation for services under IRC § 61(a)(1) (Gross Income – Compensation for Services).
  • If the arrangement includes a deferral beyond the year of service and does not meet an exemption, it could be subject to the deferred compensation rules under IRC § 409A.

• Earnout or Contingent Purchase Price (IRC § 1001, § 453)

  • If the payments are part of the purchase price for client goodwill or a book of business being transferred to the S Corporation, then they may be treated as installment payments under IRC § 1001 (Gain or Loss on Sale of Property).
  • If structured as an earnout, the payments could be reported under the installment method under IRC § 453, provided the seller is eligible

• Dividend Equivalent or Disguised Distribution (IRC § 1368)

  • If these payments are characterized as profit-sharing or return of investment in the corporation, they might be treated as distributions. However, since they are tied to specific client revenue, this is less likely