diff --git a/libraries/examples/annotation-processor-example/src/main/kotlin/example/ExampleAnnotation.kt b/libraries/examples/annotation-processor-example/src/main/kotlin/example/ExampleAnnotation.kt
index a88da9823f6..0da7a817597 100644
--- a/libraries/examples/annotation-processor-example/src/main/kotlin/example/ExampleAnnotation.kt
+++ b/libraries/examples/annotation-processor-example/src/main/kotlin/example/ExampleAnnotation.kt
@@ -1,6 +1,8 @@
 package example
 
 import java.lang.annotation.ElementType
+import java.lang.annotation.Inherited
 import java.lang.annotation.Target
 
+@Inherited
 annotation public class ExampleAnnotation
\ No newline at end of file
diff --git a/libraries/tools/kotlin-gradle-plugin/src/test/kotlin/org/jetbrains/kotlin/gradle/KotlinGradlePluginIT.kt b/libraries/tools/kotlin-gradle-plugin/src/test/kotlin/org/jetbrains/kotlin/gradle/KotlinGradlePluginIT.kt
index ae73ce254b4..037f19fe7db 100644
--- a/libraries/tools/kotlin-gradle-plugin/src/test/kotlin/org/jetbrains/kotlin/gradle/KotlinGradlePluginIT.kt
+++ b/libraries/tools/kotlin-gradle-plugin/src/test/kotlin/org/jetbrains/kotlin/gradle/KotlinGradlePluginIT.kt
@@ -98,4 +98,14 @@ class KotlinGradleIT: BaseGradleIT() {
         }
     }
 
+    Test fun testKaptInheritedAnnotations() {
+        Project("kaptInheritedAnnotations", "1.12").build("build") {
+            assertSuccessful()
+            assertFileExists("build/generated/source/kapt/main/TestClassGenerated.java")
+            assertFileExists("build/generated/source/kapt/main/AncestorClassGenerated.java")
+            assertFileExists("build/classes/main/example/TestClassGenerated.class")
+            assertFileExists("build/classes/main/example/AncestorClassGenerated.class")
+        }
+    }
+
 }
\ No newline at end of file
diff --git a/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/build.gradle b/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/build.gradle
new file mode 100644
index 00000000000..78b978e9dd7
--- /dev/null
+++ b/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/build.gradle
@@ -0,0 +1,35 @@
+buildscript {
+    repositories {
+        mavenCentral()
+        maven {
+            url 'file://' + pathToKotlinPlugin
+        }
+    }
+    dependencies {
+        classpath "org.jetbrains.kotlin:kotlin-gradle-plugin:0.1-SNAPSHOT"
+    }
+}
+
+apply plugin: "java"
+apply plugin: "kotlin"
+
+repositories {
+    maven {
+        url 'file://' + pathToKotlinPlugin
+    }
+    mavenCentral()
+}
+
+dependencies {
+    compile "org.jetbrains.kotlin:kotlin-stdlib:0.1-SNAPSHOT"
+    compile "org.jetbrains.kotlin:annotation-processor-example:0.1-SNAPSHOT"
+    kapt "org.jetbrains.kotlin:annotation-processor-example:0.1-SNAPSHOT"
+}
+
+task show << {
+    buildscript.configurations.classpath.each { println it }
+}
+
+task wrapper(type: Wrapper) {
+    gradleVersion="1.12"
+}
\ No newline at end of file
diff --git a/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/src/main/java/test.kt b/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/src/main/java/test.kt
new file mode 100644
index 00000000000..7eff7b126c0
--- /dev/null
+++ b/libraries/tools/kotlin-gradle-plugin/src/test/resources/testProject/kaptInheritedAnnotations/src/main/java/test.kt
@@ -0,0 +1,22 @@
+/*
+ * Copyright 2010-2015 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package example
+
+@example.ExampleAnnotation
+public open class TestClass
+
+public class AncestorClass : TestClass()
\ No newline at end of file