diff --git a/.idea/runConfigurations/All_Tests.xml b/.idea/runConfigurations/All_Tests.xml
index 80abd8cce40..fe9f201fd2d 100644
--- a/.idea/runConfigurations/All_Tests.xml
+++ b/.idea/runConfigurations/All_Tests.xml
@@ -16,6 +16,7 @@
     <option name="VM_PARAMETERS" value="" />
     <option name="PARAMETERS" value="" />
     <option name="WORKING_DIRECTORY" value="file://$PROJECT_DIR$" />
+    <option name="FORK_MODE" />
     <option name="ENV_VARIABLES" />
     <option name="PASS_PARENT_ENVS" value="true" />
     <option name="TEST_SEARCH_SCOPE">
diff --git a/idea/src/org/jetbrains/jet/lang/types/JetTypeChecker.java b/idea/src/org/jetbrains/jet/lang/types/JetTypeChecker.java
index 63beb6264aa..cece902df9e 100644
--- a/idea/src/org/jetbrains/jet/lang/types/JetTypeChecker.java
+++ b/idea/src/org/jetbrains/jet/lang/types/JetTypeChecker.java
@@ -287,7 +287,11 @@ public class JetTypeChecker {
     }
 
     public boolean isConvertibleTo(@NotNull JetType actual, @NotNull JetType expected) {
-        if (isSubtypeOf(actual, expected)) return true;
+        return isSubtypeOf(actual, expected) ||
+               isConvertibleBySpecialConversion(actual, expected);
+    }
+
+    public boolean isConvertibleBySpecialConversion(@NotNull JetType actual, @NotNull JetType expected) {
         if (expected.getConstructor().equals(JetStandardClasses.getTuple(0).getTypeConstructor())) {
             return true;
         }
diff --git a/idea/src/org/jetbrains/jet/lang/types/JetTypeInferrer.java b/idea/src/org/jetbrains/jet/lang/types/JetTypeInferrer.java
index 1d51ae9f245..9b9fa6166be 100644
--- a/idea/src/org/jetbrains/jet/lang/types/JetTypeInferrer.java
+++ b/idea/src/org/jetbrains/jet/lang/types/JetTypeInferrer.java
@@ -289,13 +289,22 @@ public class JetTypeInferrer {
         for (Map.Entry<JetElement, JetType> entry : typeMap.entrySet()) {
             JetType actualType = entry.getValue();
             JetElement element = entry.getKey();
-            if (!semanticServices.getTypeChecker().isConvertibleTo(actualType, expectedReturnType)) {
-                if (element instanceof JetExpression) {
-                    JetExpression expression = (JetExpression) element;
-                    semanticServices.getErrorHandler().typeMismatch(expression, expectedReturnType, actualType);
+            JetTypeChecker typeChecker = semanticServices.getTypeChecker();
+            if (!typeChecker.isSubtypeOf(actualType, expectedReturnType)) {
+                if (typeChecker.isConvertibleBySpecialConversion(actualType, expectedReturnType)) {
+                    if (expectedReturnType.getConstructor().equals(JetStandardClasses.getUnitType().getConstructor()) &&
+                        element.getParent() instanceof JetReturnExpression) {
+                        semanticServices.getErrorHandler().genericError(element.getNode(), "This function must return a value of type Unit");
+                    }
                 }
                 else {
-                    semanticServices.getErrorHandler().genericError(element.getNode(), "This function must return a value of type " + expectedReturnType);
+                    if (element instanceof JetExpression) {
+                        JetExpression expression = (JetExpression) element;
+                        semanticServices.getErrorHandler().typeMismatch(expression, expectedReturnType, actualType);
+                    }
+                    else {
+                        semanticServices.getErrorHandler().genericError(element.getNode(), "This function must return a value of type " + expectedReturnType);
+                    }
                 }
             }
         }
@@ -689,11 +698,19 @@ public class JetTypeInferrer {
             // TODO : change types according to is and null checks
             JetExpression elseBranch = expression.getElse();
             JetExpression thenBranch = expression.getThen();
-            JetType thenType = null;
-            if (thenBranch != null) {
-                thenType = getType(scope, thenBranch, true);
+
+            if (elseBranch == null) {
+                if (thenBranch != null) {
+                    getType(scope, thenBranch, true);
+                    result = JetStandardClasses.getUnitType();
+                }
             }
-            if (elseBranch != null) {
+            else if (thenBranch == null) {
+                getType(scope, elseBranch, true);
+                result = JetStandardClasses.getUnitType();
+            }
+            else {
+                JetType thenType = getType(scope, thenBranch, true);
                 JetType elseType = getType(scope, elseBranch, true);
                 if (thenType == null) {
                     result = elseType;
@@ -705,9 +722,6 @@ public class JetTypeInferrer {
                     result = semanticServices.getTypeChecker().commonSupertype(Arrays.asList(thenType, elseType));
                 }
             }
-            else {
-                result = JetStandardClasses.getUnitType();
-            }
         }
 
         private void checkCondition(@NotNull JetScope scope, @Nullable JetExpression condition) {
diff --git a/idea/testData/cfg/Nonlocals.instructions b/idea/testData/cfg/Nonlocals.instructions
index 85384dfecb1..56c7b0564ea 100644
--- a/idea/testData/cfg/Nonlocals.instructions
+++ b/idea/testData/cfg/Nonlocals.instructions
@@ -36,7 +36,7 @@ l5:
     <END>
 =====================
 == nonlocals1 ==
-fun nonlocals1(a : Boolean, b : Boolean) : Unit {
+fun nonlocals1(a : Boolean, b : Boolean) : Any? {
     if (a)
         return 1
     1
diff --git a/idea/testData/cfg/Nonlocals.jet b/idea/testData/cfg/Nonlocals.jet
index ea03bba2a3c..ea9b7a2b275 100644
--- a/idea/testData/cfg/Nonlocals.jet
+++ b/idea/testData/cfg/Nonlocals.jet
@@ -1,4 +1,4 @@
-fun nonlocals1(a : Boolean, b : Boolean) : Unit {
+fun nonlocals1(a : Boolean, b : Boolean) : Any? {
     if (a)
         return 1
     1
diff --git a/idea/testData/checker/FunctionReturnTypes.jet b/idea/testData/checker/FunctionReturnTypes.jet
index 5aa66116cfe..fddd7b9b307 100644
--- a/idea/testData/checker/FunctionReturnTypes.jet
+++ b/idea/testData/checker/FunctionReturnTypes.jet
@@ -3,6 +3,8 @@
 fun unitEmptyInfer() {}
 fun unitEmpty() : Unit {}
 fun unitEmptyReturn() : Unit {return}
+fun unitIntReturn() : Unit {return <error>1</error>}
+fun unitUnitReturn() : Unit {return ()}
 fun unitShort() : Unit = ()
 fun unitShortConv() : Unit = 1
 fun unitShortNull() : Unit = null
diff --git a/idea/tests/org/jetbrains/jet/types/JetTypeCheckerTest.java b/idea/tests/org/jetbrains/jet/types/JetTypeCheckerTest.java
index c7c6a6f54a0..78a674ae48e 100644
--- a/idea/tests/org/jetbrains/jet/types/JetTypeCheckerTest.java
+++ b/idea/tests/org/jetbrains/jet/types/JetTypeCheckerTest.java
@@ -101,6 +101,9 @@ public class JetTypeCheckerTest extends LightDaemonAnalyzerTestCase {
         assertType("if (true) null else null", "Nothing?");
 
         assertType("if (true) 1 else '1'", "Any");
+
+        assertType("if (true) else '1'", "Unit");
+        assertType("if (true) else a = 0", "Unit");
     }
 
     public void testWhen() throws Exception {