Dan is one of two general partners in XNX Partnership. They share equally in income and losses. When XNX started three years ago, Dan contributed $5,000 cash. XNX had $3,000 of ordinary business income in the first tax year and $10,000 in the second. Dan made no withdrawals in the first year and withdrew $4,000 in the second. Also, in the second tax year, XNX borrowed $2,500 from the bank, and both partners signed the note. Dan made no capital contributions in the second year. What is Dan's adjusted basis in XNX at the end of the second tax year?

a) $5,000 b) $8,750 c) $6,500 d) $7,500