Question

Classification: Is the school district's participation in the National School Lunch grant program an exchange transaction or a nonexchange transaction? What is the basis for your answer? Please see below.

The example involves a public school cafeteria serving lunch. Some students pay full price for their food, but others receive lunch for a reduced price or for free under the federal National School Lunch Program. Let's assume the school cafeteria meets all nutritional requirements to qualify for National School Lunch Program - all it needs to do now is serve the lunches. The grant is expenditure driven - when the school district proves the reduced price and free meals have been provided, the federal government owes it a grant payment. Ignore the part of the program that involves school districts receiving free food products from the USDA to use in the meals.

Answer 1

Answer:

It is non exchange transaction, as in the question it is given that receiving food products from USDA is not covered in the question it means that person will recieve value in exchange of providing and only when the conditions for grant are satisfied i.e. Nutritional Requirment and Free of Cost.

If the following conditions are not satisfied then entity will not be eligible for any amount. Hence it is classified as Non exchange transaction.