James and Ryann are good friends. They decide to open a sports equipment store together because of their love of the outdoors. They each own 50% in SportsCrazy, an S-Corp. Ryann manages the business full-time. James has a thriving tax practice and therefore does not participate in the operation of the business. Which of the following is TRUE?

A.Only the income distributed to Ryann is considered passive income.

B.Only the income distributed to James is considered passive income.

C.The income distributed to both Ryann and James is considered passive income.

D.The income distributed to both Ryann and James is considered active income.