diff --git a/collects/framework/private/scheme.rkt b/collects/framework/private/scheme.rkt
index 199ad465d9..556a96608a 100644
--- a/collects/framework/private/scheme.rkt
+++ b/collects/framework/private/scheme.rkt
@@ -521,28 +521,32 @@
           (letrec	
               ([find-offset
                 (λ (start-pos)
-                  (let ([end-pos
-                         (let loop ([p start-pos])
-                           (let ([c (get-character p)])
-                             (cond
-                               [(char=? c #\tab)
-                                (loop (add1 p))]
-                               [(char=? c #\newline)
-                                p]
-                               [(char-whitespace? c)
-                                (loop (add1 p))]
-                               [else
-                                p])))]
-                        [start-x (box 0)]
-                        [end-x (box 0)])
-                    (position-location start-pos start-x #f #t #t)
-                    (position-location end-pos end-x #f #t #t)
-                    (let-values ([(w _1 _2 _3) (send (get-dc) get-text-extent "x" 
-                                                     (send (send (get-style-list)
-                                                                 find-named-style "Standard")
-                                                           get-font))])
-                      (cons (inexact->exact (floor (/ (- (unbox end-x) (unbox start-x)) w)))
-                            end-pos))))]
+                  (define tab-char? #f)
+                  (define end-pos
+                    (let loop ([p start-pos])
+                      (let ([c (get-character p)])
+                        (cond
+                          [(char=? c #\tab)
+                           (set! tab-char? #t)
+                           (loop (add1 p))]
+                          [(char=? c #\newline)
+                           p]
+                          [(char-whitespace? c)
+                           (loop (add1 p))]
+                          [else
+                           p]))))
+                  (define start-x (box 0))
+                  (define end-x (box 0))
+                  (position-location start-pos start-x #f #t #t)
+                  (position-location end-pos end-x #f #t #t)
+                  (define-values (w _1 _2 _3)
+                    (send (get-dc) get-text-extent "x" 
+                          (send (send (get-style-list)
+                                      find-named-style "Standard")
+                                get-font)))
+                  (values (inexact->exact (floor (/ (- (unbox end-x) (unbox start-x)) w)))
+                          end-pos
+                          tab-char?))]
                
                [visual-offset
                 (λ (pos)
@@ -559,12 +563,11 @@
                             [else (add1 (loop (sub1 p)))])))))]
                [do-indent
                 (λ (amt)
-                  (let* ([pos-start end]
-                         [curr-offset (find-offset pos-start)])
-                    (unless (= amt (- (cdr curr-offset) pos-start))
-                      (delete pos-start (cdr curr-offset))
-                      (insert (make-string amt #\space)
-                              pos-start))))]
+                  (define pos-start end)
+                  (define-values (gwidth curr-offset tab-char?) (find-offset pos-start))
+                  (unless (and (not tab-char?) (= amt (- curr-offset pos-start)))
+                    (delete pos-start curr-offset)
+                    (insert (make-string amt #\space) pos-start)))]
                [get-proc
                 (λ ()
                   (let ([id-end (get-forward-sexp contains)])
@@ -589,7 +592,9 @@
                   (and up-p
                        (equal? #\{ (get-character up-p))))]
                
-               [indent-first-arg (λ (start) (car (find-offset start)))])
+               [indent-first-arg (λ (start)
+                                   (define-values (gwidth curr-offset tab-char?) (find-offset start))
+                                   gwidth)])
             (when (and is-tabbable?
                        (not (char=? (get-character (sub1 end))
                                     #\newline)))
@@ -598,7 +603,7 @@
               [(not is-tabbable?) 
                (when (= para 0)
                  (do-indent 0))]
-              [(let ([real-start (cdr (find-offset end))]) 
+              [(let-values ([(gwidth real-start tab-char?) (find-offset end)]) 
                  (and (<= (+ 3 real-start) (last-position))
                       (string=? ";;;"
                                 (get-text real-start
diff --git a/collects/tests/framework/scheme.rkt b/collects/tests/framework/scheme.rkt
index 60e1165c38..e9ca909b9f 100644
--- a/collects/tests/framework/scheme.rkt
+++ b/collects/tests/framework/scheme.rkt
@@ -29,3 +29,28 @@
 (test-text-balanced? 7 "(foo]" 0 #f #t)
 (test-text-balanced? 8 "{foo} ((bar) [5.9])" 0 #f #t)
 (test-text-balanced? 9 "#(1 2 . 3)" 0 #f #t)
+
+(define (test-indentation which before after)
+  (test
+   (string->symbol (format "scheme:test-indentation-~a" which))
+   (λ (x) (equal? x after))
+   (λ ()
+     (queue-sexp-to-mred
+      `(let* ([t (new scheme:text%)]
+              [f (new frame% [label ""] [width 600] [height 600])]
+              [ec (new editor-canvas% [parent f] [editor t])])
+         (send f reflow-container)
+         (send t insert ,before)
+         (send t tabify-all)
+         (send t get-text))))))
+
+(test-indentation 1 "a" "a")
+(test-indentation 2 "(a\n b)" "(a\n b)")
+(test-indentation 3 "(a\nb)" "(a\n b)")
+(test-indentation 3 "(a b\nc)" "(a b\n   c)")
+(test-indentation 3 "(a ...\nb)" "(a ...\n b)")
+(test-indentation 4 "(lambda (x)\nb)" "(lambda (x)\n  b)")
+(test-indentation 5 "(lambdaa (x)\nb)" "(lambdaa (x)\n         b)")
+(test-indentation 6
+                  "(define x\n  (let/ec return\n    (when 1\n      (when 2\n\t\t      3))\n    2))"
+                  "(define x\n  (let/ec return\n    (when 1\n      (when 2\n        3))\n    2))")