Final answer:
A gain or loss is recognized for the difference between the fair value and the book value of the assets distributed when a property dividend is declared. This difference represents the adjustment in value that needs to be accounted for at the time of the dividend distribution.
Step-by-step explanation:
When a property dividend is declared, the correct answer to whether a gain or loss is recognized is for the difference between the fair value and the book value of the assets distributed. This is option c. When dividends are distributed, they can take the form of either cash or property. In the case of a property dividend, the company distributes assets other than cash to its shareholders. The accounting for such a dividend requires that the company revalue the asset to its current fair value and recognize any gain or loss based on this revaluation. This gain or loss is the difference between the asset's fair value at the time of distribution and its book value, with the book value being its original cost minus accumulated depreciation.
The concept of dividends ties back to the expectation investors have for a return on their investment, whether through direct payments or through capital gains. In the context of this question, it is essential to appreciate that dividends are seen as a return on investment as well, influencing investor decisions alongside potential capital gains.