Dave and Buster each own a successful restaurant. They decide to combine their restaurants into a new C Corporation called Dave and Buster's (D&B's) Dave and Buster will each receive 50% of D&B's stock.

Dave is contributing property to D&B's with a fair market value of $1,000,000. He is also transferring liaiblities of $200,000. His tax basis in the property transferred is $375,000. In return, Dave is receiving stock with a fair market value of $800,000.

1. How much gain or loss does Dave realize in this exchange?

2. How much gain or loss does Dave recognize on this exchange?

3. What is Dave's tax basis in his newly received D&B's stock?