Income Tax Assessment Act 1997
A *capital gain or *capital loss you make from a *CGT asset is disregarded if, at the time of the *CGT event, the asset is:
(a) your *trading stock; or
(b) if you are a partner, trading stock of the partnership; or
(c) if you are absolutely entitled to the asset as against the trustee of a trust (disregarding any legal disability), trading stock of the trustee. 118-25(2)
A *capital gain or *capital loss you make in these circumstances is disregarded:
(a) you start holding as *trading stock a *CGT asset you already own but do not hold as trading stock; and
(b) you elect under paragraph 70-30(1)(a) to be treated as having sold the asset for its cost (worked out under that section).
Paragraph 70-30(1)(a) allows you to elect the cost of the asset, or its market value, just before it became trading stock.
You may make a capital gain or loss if you elect its market value: see CGT event K4.