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I understand CGT is calculated on market value when selling land to a family member but I'm unsure what happens in the circumstance below:
From your description, it seems the property A and B are both your family member's property. When this happens, he/she has to choose in a given period which one should be his/her own residence.
In my opinion, if it is the main residence of this family member, then the CGT triggered by selling this property can be exempt from capital gain tax.
September 2018 - last edited September 2018
The information provided by @macfanboy is correct as it is documented in a ruling by the ATO.
The information provided by @Lozza is only general information about the main residence CGT exemption which applies only to the faimily residence and does not apply to adjacant land (even when owned by your family), which is covered under seperate legislation and is more complex, and the CGT treatment can vary as per the ATO Ruling.
The ATO rulings are based on legislation, the courts interpretation of that legislation as well as the ATO views and are one of the main taxation reference points.
You can also seek written clarification from the ATO by applying for a Private Ruling . This will give you the opportunity to discusss with the officer that is going to provide the written response and its a totally free service.
ATO 13 28 61