Rayburn Owns All the Shares of Newcastle Corporation That Operates $\begin{array} { c c } \text { Rayburn } & \text { Newcastle } \\\end{array}$

Rayburn owns all the shares of Newcastle Corporation that operates as an S corporation. Rayburn's basis in the stock is $15,000. During the year he receives a cash distribution of $22,000 from Newcastle. What must Rayburn and Newcastle report as income from the cash distribution? $\begin{array} { c c } \text { Rayburn } & \text { Newcastle } \\\end{array}$
A) $\begin{array}{ll}\$-0- &&& \$-0- \\\end{array}$
B) $\begin{array}{ll} \$ 7,000 &&& \$-0- \\\end{array}$
C) $\begin{array}{ll} \$-0- &&& \$ 7,000 \\\end{array}$
D) $\begin{array}{ll} \$ 7,000 &&& \$ 7,000\end{array}$