Index: app/models/issue.rb
===================================================================
--- app/models/issue.rb	(revision 18937)
+++ app/models/issue.rb	(working copy)
@@ -1516,10 +1516,19 @@
   # Returns a scope of projects that user can assign the issue to
   def allowed_target_projects(user=User.current, context=nil)
     if new_record? && context.is_a?(Project) && !copy?
-      current_project = context.self_and_descendants
-    elsif new_record?
-      current_project = nil
-    else
+      case Setting.cross_project_subtasks
+      when 'system'
+        current_project = nil
+      when 'tree'
+        current_project = context.root.self_and_descendants
+      when 'hierarchy'
+        current_project = context.hierarchy
+      when 'descendants'
+        current_project = context.self_and_descendants
+      else
+        current_project = nil
+      end    
+    else                                                                                                                                                                                                           
       current_project = project
     end