diff --git a/src/services/formatting/formatting.ts b/src/services/formatting/formatting.ts
index 868683bb6af..8a713dc032c 100644
--- a/src/services/formatting/formatting.ts
+++ b/src/services/formatting/formatting.ts
@@ -387,9 +387,7 @@ namespace ts.formatting {
 
             let indentation = inheritedIndentation;
             if (indentation === Constants.Unknown) {
-                if (SmartIndenter.shouldInheritParentIndentation(parent, node) ||
-                    SmartIndenter.childStartsOnTheSameLineWithElseInIfStatement(parent, node, startLine, sourceFile)) {
-
+                if (SmartIndenter.childStartsOnTheSameLineWithElseInIfStatement(parent, node, startLine, sourceFile)) {
                     indentation = parentDynamicIndentation.getIndentation();
                 }
                 else {
@@ -590,6 +588,10 @@ namespace ts.formatting {
                     return inheritedIndentation;
                 }
 
+                if (SmartIndenter.shouldInheritParentIndentation(parent, child)) {
+                    parentDynamicIndentation = getDynamicIndentation(parent, parentStartLine, indentation, 0);
+                }
+
                 if (isToken(child)) {
                     // if child node is a token, it does not impact indentation, proceed it using parent indentation scope rules
                     let tokenInfo = formattingScanner.readTokenInfo(child);