PowerShell · SteveL-MSFT · Mar 21, 2017 · Mar 22, 2017 · Mar 23, 2017 · Mar 24, 2017
diff --git a/...m.Management.Automation/commands/utility/FormatAndOutput/out-console/ConsoleLineOutput.cs b/...m.Management.Automation/commands/utility/FormatAndOutput/out-console/ConsoleLineOutput.cs
@@ -321,7 +321,7 @@ private void OnWriteLine(string s)
                     // If the host is in "transcribe only"
                     // mode (due to an implicitly added call to Out-Default -Transcribe),
                     // then don't call the actual host API.
-                    if (!_console.TranscribeOnly)
+                    if (_console.TranscribeOnlyCount == 0)
                     {
                         _console.WriteLine(s);
                     }

diff --git a/src/System.Management.Automation/commands/utility/FormatAndOutput/out-console/OutConsole.cs b/src/System.Management.Automation/commands/utility/FormatAndOutput/out-console/OutConsole.cs
@@ -79,10 +79,10 @@ protected override void BeginProcessing()
                 mrt.MergeUnclaimedPreviousErrorResults = true;
             }
 
-            _savedTranscribeOnly = Host.UI.TranscribeOnly;
             if (Transcript)
             {
-                Host.UI.TranscribeOnly = true;
+                _incrementedTranscibeOnlyCount = true;
+                Host.UI.TranscribeOnlyCount++;
             }
 
             // This needs to be done directly through the command runtime, as Out-Default
@@ -143,15 +143,35 @@ protected override void EndProcessing()
             }
 
             base.EndProcessing();
+        }
 
-            if (Transcript)
+        /// <summary>
+        /// Revert transcription state on Dispose
+        /// </summary>
+        protected override void InternalDispose()
+        {
+            if (_disposed)
+            {
+                return;
+            }
+
+            try
+            {
+                base.InternalDispose();
+            }
+            finally
             {
-                Host.UI.TranscribeOnly = _savedTranscribeOnly;
+                if (_incrementedTranscibeOnlyCount && --Host.UI.TranscribeOnlyCount < 0)
+                {
+                    Host.UI.TranscribeOnlyCount = 0;
+                }
             }
+            _disposed = true;
         }
 
+        private bool _disposed = false;
+        private bool _incrementedTranscibeOnlyCount = false;
         private ArrayList _outVarResults = null;
-        private bool _savedTranscribeOnly = false;
     }
 
     /// <summary>

diff --git a/src/System.Management.Automation/engine/hostifaces/MshHostUserInterface.cs b/src/System.Management.Automation/engine/hostifaces/MshHostUserInterface.cs
@@ -386,11 +386,11 @@ internal void IgnoreCommand(string commandText, InvocationInfo invocation)
         }
 
         /// <summary>
-        /// Flag to determine whether the host is in "Transcribe Only" mode,
+        /// Count to determine whether the host is in "Transcribe Only" mode,
         /// so that when content is sent through Out-Default it doesn't
-        /// make it to the actual host.
+        /// make it to the actual host if count == 0
         /// </summary>
-        internal bool TranscribeOnly { get; set; }
+        internal int TranscribeOnlyCount { get; set; }
 
         /// <summary>
         /// Flag to determine whether the host is transcribing.

diff --git a/test/powershell/Modules/Microsoft.PowerShell.Core/Out-Default.Tests.ps1 b/test/powershell/Modules/Microsoft.PowerShell.Core/Out-Default.Tests.ps1
@@ -0,0 +1,39 @@
+Describe "Out-Default Tests" -tag CI {
+    BeforeAll {
+        # due to https://github.com/PowerShell/PowerShell/issues/3405, `Out-Default -Transcript` emits output to pipeline
+        # as running in Pester effectively wraps everything in parenthesis, workaround is to use another powershell
+        # to run the test script passed as a string
+        $powershell = "$PSHOME/powershell"
+    }
+
+    It "'Out-Default -Transcript' shows up in transcript, but not host" {
+        $script = @"
+            `$null = Start-Transcript -Path "$testdrive\transcript.txt";
+            'hello' | Microsoft.PowerShell.Core\Out-Default -Transcript;
+            'bye';
+            `$null = Stop-Transcript
+"@
+
+        & $powershell -c $script | Should BeExactly 'bye'
+        "TestDrive:\transcript.txt" | Should Contain 'hello'
+    }
+
+    It "Out-Default reverts transcription state when used more than once in a pipeline" {
+        & $powershell -c "Out-Default -Transcript | Out-Default -Transcript; 'Hello'" | Should BeExactly "Hello"
+    }
+
+    It "Out-Default reverts transcription state when exception occurs in pipeline" {
+        & $powershell -c "try { & { throw } | Out-Default -Transcript } catch {}; 'Hello'" | Should BeExactly "Hello"
+    }
+
+    It "Out-Default reverts transcription state even if Dispose() isn't called" {
+        $script = @"
+            `$sp = {Out-Default -Transcript}.GetSteppablePipeline();
+            `$sp.Begin(`$false);
+            `$sp = `$null;
+            [GC]::Collect();
+            'hello'
+"@
+        & $powershell -c $script | Should BeExactly 'hello'
+    }
+}