why is the correct answer choice option D. $3,500?

James pays \$2,000 for a 10\% capital, profits and loss interest in Madison Partnership on January 1, 2022. Madison has liabilities of $16.000. The partners share economic risk of lose from liabilfies in the same way they share partnership losses. In 2022, Madison incurs losses of 56,000 and the liabilities increase by $5,000. James' basis at year-end is a. $3.900 b. $2,000 c. $4,100 d. $3.500