diff --git a/compiler/jet.as.java.psi/src/org/jetbrains/jet/asJava/KotlinCodeBlockModificationListener.kt b/compiler/jet.as.java.psi/src/org/jetbrains/jet/asJava/KotlinCodeBlockModificationListener.kt
index b7e64b85f2d..fcaf8499b79 100644
--- a/compiler/jet.as.java.psi/src/org/jetbrains/jet/asJava/KotlinCodeBlockModificationListener.kt
+++ b/compiler/jet.as.java.psi/src/org/jetbrains/jet/asJava/KotlinCodeBlockModificationListener.kt
@@ -107,81 +107,41 @@ public class KotlinCodeBlockModificationListener(modificationTracker: PsiModific
             if (element is PsiFileSystemItem) return false
             if (element == null || element.getParent() == null) return true
 
-            var parent = element
-            while (parent !is PsiFile && parent !is PsiDirectory && parent != null) {
-                if (parent is JetClass) return false // anonymous or local class
+            val blockDeclarationCandidate = JetPsiUtil.getTopmostParentOfTypes(
+                    element,
+                    javaClass<JetProperty>(),
+                    javaClass<JetNamedFunction>())
 
-                if (parent is JetBlockExpression) {
-                    if (!shouldChangeModificationCount(element)) {
-                        return true;
-                    }
-                }
-
-                parent = parent!!.getParent()
-            }
-
-            return false
-        }
-
-        public fun shouldChangeModificationCount(place: PsiElement): Boolean {
-            // false -> inside code block
-            // true -> means nothing, parent will be checked
-
-            val declaration = PsiTreeUtil.getParentOfType<JetDeclaration>(place, javaClass<JetDeclaration>(), true)
-            if (declaration == null) return true
-
-            return when (declaration) {
+            when (blockDeclarationCandidate) {
                 is JetNamedFunction -> {
-                    val function: JetNamedFunction = declaration
-                    if (function.hasDeclaredReturnType() || function.hasBlockBody()) {
-                        takePartInDeclarationTypeInference(function)
+                    val function = blockDeclarationCandidate : JetNamedFunction
+                    if (function.hasBlockBody() && function.getBodyExpression().isAncestorOf(element)) {
+                        return true
                     }
-                    else {
-                        shouldChangeModificationCount(function)
+
+                    if (function.hasDeclaredReturnType() && function.getInitializer().isAncestorOf(element)) {
+                        return true
                     }
                 }
-                is JetPropertyAccessor -> {
-                    takePartInDeclarationTypeInference(declaration)
-                }
                 is JetProperty -> {
-                    val property = declaration as JetProperty
-                    if (property.getTypeReference() != null) {
-                        takePartInDeclarationTypeInference(property)
-                    }
-                    else {
-                        shouldChangeModificationCount(property)
-                    }
-                }
-                is JetMultiDeclaration, is JetMultiDeclarationEntry, is JetFunctionLiteral -> {
-                    shouldChangeModificationCount(declaration)
-                }
-                else -> {
-                    true
-                }
-            }
-        }
-
-        private fun takePartInDeclarationTypeInference(place: PsiElement): Boolean {
-            val declaration = PsiTreeUtil.getParentOfType<JetDeclaration>(place, javaClass<JetDeclaration>(), true)
-            if (declaration != null) {
-                if (declaration is JetNamedFunction) {
-                    val function = declaration as JetNamedFunction
-                    if (!function.hasDeclaredReturnType() && !function.hasBlockBody()) {
+                    val property = blockDeclarationCandidate : JetProperty
+                    val typeReference = property.getTypeReference()
+                    if (typeReference != null && property.getInitializer().isAncestorOf(element)) {
                         return true
                     }
-                }
-                else if (declaration is JetProperty) {
-                    val property = declaration as JetProperty
-                    if (property.getTypeReference() == null) {
-                        return true
+
+                    for (accessor in property.getAccessors()) {
+                        when {
+                            accessor.getInitializer().isAncestorOf(element) -> return true
+                            accessor.getBodyExpression().isAncestorOf(element) -> return true
+                        }
                     }
                 }
-
-                return takePartInDeclarationTypeInference(declaration)
             }
 
             return false
         }
+
+        private fun PsiElement?.isAncestorOf(element: PsiElement) = PsiTreeUtil.isAncestor(this, element, false)
     }
 }
-
diff --git a/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block.kt b/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block.kt
new file mode 100644
index 00000000000..b9848899881
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block.kt
@@ -0,0 +1,9 @@
+// FALSE
+
+class Test {
+    class Other {
+        fun test() {
+            <caret>
+        }
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block_Expression.kt b/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block_Expression.kt
new file mode 100644
index 00000000000..14b4dbed0b5
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block_Expression.kt
@@ -0,0 +1,9 @@
+// FALSE
+
+class Test {
+    class Other {
+        fun test() {
+            val a<caret>
+        }
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/FunNoType_Block_Class.kt b/idea/testData/codeInsight/outOfBlock/FunNoType_Block_Class.kt
new file mode 100644
index 00000000000..993740c1f3a
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/FunNoType_Block_Class.kt
@@ -0,0 +1,6 @@
+// FALSE
+fun test() {
+    class Test {
+        <caret>
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer.kt b/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer.kt
new file mode 100644
index 00000000000..9b402c40350
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer.kt
@@ -0,0 +1,4 @@
+// TRUE
+// (Investigation starts from parent)
+
+fun test() : Int = <caret>12
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer_Expression.kt b/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer_Expression.kt
new file mode 100644
index 00000000000..5b46c5502b3
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/FunWithType_Initializer_Expression.kt
@@ -0,0 +1,3 @@
+// FALSE
+
+fun test() : Int = 12 + <caret>12
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/InClassInClass.kt b/idea/testData/codeInsight/outOfBlock/InClassInClass.kt
new file mode 100644
index 00000000000..8365185537f
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/InClassInClass.kt
@@ -0,0 +1,6 @@
+// TRUE
+class Test {
+    class Other {
+        <caret>
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/InFunInFunctionInitializerInFun.kt b/idea/testData/codeInsight/outOfBlock/InFunInFunctionInitializerInFun.kt
new file mode 100644
index 00000000000..9e48681bfc9
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/InFunInFunctionInitializerInFun.kt
@@ -0,0 +1,11 @@
+// TRUE
+
+val a = 1
+fun test() = if (a) {
+    fun hello() {
+        <caret>
+    }
+}
+else {
+
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/InFunInProperty.kt b/idea/testData/codeInsight/outOfBlock/InFunInProperty.kt
new file mode 100644
index 00000000000..bd55a45a5d5
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/InFunInProperty.kt
@@ -0,0 +1,11 @@
+// FALSE
+fun test() {
+    val some = if () {
+        fun other() {
+            <caret>
+        }
+    }
+    else {
+
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/InFunInPropertyInObjectLiteral.kt b/idea/testData/codeInsight/outOfBlock/InFunInPropertyInObjectLiteral.kt
new file mode 100644
index 00000000000..b64af660cd3
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/InFunInPropertyInObjectLiteral.kt
@@ -0,0 +1,8 @@
+// FALSE
+trait Some
+
+fun test() {
+    val foo = object: Some {
+        <caret>
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/InFunObjectLiteral.kt b/idea/testData/codeInsight/outOfBlock/InFunObjectLiteral.kt
new file mode 100644
index 00000000000..82d8c9c12e4
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/InFunObjectLiteral.kt
@@ -0,0 +1,10 @@
+// FALSE
+trait Some
+
+fun test() {
+    object : Some {
+        fun test(<caret>) {
+
+        }
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block.kt b/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block.kt
new file mode 100644
index 00000000000..5a72266cb3c
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block.kt
@@ -0,0 +1,6 @@
+// FALSE
+object Some {
+    fun test() {
+        <caret>
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block_Expression.kt b/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block_Expression.kt
new file mode 100644
index 00000000000..af583024d26
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block_Expression.kt
@@ -0,0 +1,7 @@
+// FALSE
+
+object Some {
+    fun test() {
+        if (<caret>)
+    }
+}
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/PropertyNoType_Initializer_String.kt b/idea/testData/codeInsight/outOfBlock/PropertyNoType_Initializer_String.kt
new file mode 100644
index 00000000000..aa541ff3b65
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/PropertyNoType_Initializer_String.kt
@@ -0,0 +1,5 @@
+// TRUE
+
+// TODO: Investigate
+
+val test = "so<caret>me"
\ No newline at end of file
diff --git a/idea/testData/codeInsight/outOfBlock/PropertyWithType_Initializer_String.kt b/idea/testData/codeInsight/outOfBlock/PropertyWithType_Initializer_String.kt
new file mode 100644
index 00000000000..259979a5210
--- /dev/null
+++ b/idea/testData/codeInsight/outOfBlock/PropertyWithType_Initializer_String.kt
@@ -0,0 +1,3 @@
+// FALSE
+
+val test: String = "<caret>"
\ No newline at end of file
diff --git a/idea/tests/org/jetbrains/jet/plugin/codeInsight/OutOfBlockModificationTestGenerated.java b/idea/tests/org/jetbrains/jet/plugin/codeInsight/OutOfBlockModificationTestGenerated.java
index e6ab99dd954..0c65ab5d331 100644
--- a/idea/tests/org/jetbrains/jet/plugin/codeInsight/OutOfBlockModificationTestGenerated.java
+++ b/idea/tests/org/jetbrains/jet/plugin/codeInsight/OutOfBlockModificationTestGenerated.java
@@ -36,6 +36,18 @@ public class OutOfBlockModificationTestGenerated extends AbstractOutOfBlockModif
         JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), new File("idea/testData/codeInsight/outOfBlock"), Pattern.compile("^(.+)\\.kt$"), true);
     }
 
+    @TestMetadata("Class_Class_FunNoType_Block.kt")
+    public void testClass_Class_FunNoType_Block() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("Class_Class_FunNoType_Block_Expression.kt")
+    public void testClass_Class_FunNoType_Block_Expression() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/Class_Class_FunNoType_Block_Expression.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("FunInFun.kt")
     public void testFunInFun() throws Exception {
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/FunInFun.kt");
@@ -48,6 +60,24 @@ public class OutOfBlockModificationTestGenerated extends AbstractOutOfBlockModif
         doTest(fileName);
     }
 
+    @TestMetadata("FunNoType_Block_Class.kt")
+    public void testFunNoType_Block_Class() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/FunNoType_Block_Class.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("FunWithType_Initializer.kt")
+    public void testFunWithType_Initializer() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/FunWithType_Initializer.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("FunWithType_Initializer_Expression.kt")
+    public void testFunWithType_Initializer_Expression() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/FunWithType_Initializer_Expression.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("InAntonymsObjectDeclaration.kt")
     public void testInAntonymsObjectDeclaration() throws Exception {
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InAntonymsObjectDeclaration.kt");
@@ -60,6 +90,12 @@ public class OutOfBlockModificationTestGenerated extends AbstractOutOfBlockModif
         doTest(fileName);
     }
 
+    @TestMetadata("InClassInClass.kt")
+    public void testInClassInClass() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InClassInClass.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("InClassPropertyAccessor.kt")
     public void testInClassPropertyAccessor() throws Exception {
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InClassPropertyAccessor.kt");
@@ -72,12 +108,36 @@ public class OutOfBlockModificationTestGenerated extends AbstractOutOfBlockModif
         doTest(fileName);
     }
 
+    @TestMetadata("InFunInFunctionInitializerInFun.kt")
+    public void testInFunInFunctionInitializerInFun() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunInFunctionInitializerInFun.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("InFunInMultiDeclaration.kt")
     public void testInFunInMultiDeclaration() throws Exception {
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunInMultiDeclaration.kt");
         doTest(fileName);
     }
 
+    @TestMetadata("InFunInProperty.kt")
+    public void testInFunInProperty() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunInProperty.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("InFunInPropertyInObjectLiteral.kt")
+    public void testInFunInPropertyInObjectLiteral() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunInPropertyInObjectLiteral.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("InFunObjectLiteral.kt")
+    public void testInFunObjectLiteral() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunObjectLiteral.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("InFunWithInference.kt")
     public void testInFunWithInference() throws Exception {
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InFunWithInference.kt");
@@ -119,4 +179,28 @@ public class OutOfBlockModificationTestGenerated extends AbstractOutOfBlockModif
         String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/InPropertyWithInference.kt");
         doTest(fileName);
     }
+
+    @TestMetadata("Object_FunNoType_Block.kt")
+    public void testObject_FunNoType_Block() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("Object_FunNoType_Block_Expression.kt")
+    public void testObject_FunNoType_Block_Expression() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/Object_FunNoType_Block_Expression.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("PropertyNoType_Initializer_String.kt")
+    public void testPropertyNoType_Initializer_String() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/PropertyNoType_Initializer_String.kt");
+        doTest(fileName);
+    }
+
+    @TestMetadata("PropertyWithType_Initializer_String.kt")
+    public void testPropertyWithType_Initializer_String() throws Exception {
+        String fileName = JetTestUtils.navigationMetadata("idea/testData/codeInsight/outOfBlock/PropertyWithType_Initializer_String.kt");
+        doTest(fileName);
+    }
 }