diff --git a/rm-server/test/java/org/alfresco/module/org_alfresco_module_rm/test/integration/issue/RM1039Test.java b/rm-server/test/java/org/alfresco/module/org_alfresco_module_rm/test/integration/issue/RM1039Test.java
new file mode 100644
index 0000000000..512d16709d
--- /dev/null
+++ b/rm-server/test/java/org/alfresco/module/org_alfresco_module_rm/test/integration/issue/RM1039Test.java
@@ -0,0 +1,186 @@
+/*
+ * Copyright (C) 2005-2013 Alfresco Software Limited.
+ *
+ * This file is part of Alfresco
+ *
+ * Alfresco is free software: you can redistribute it and/or modify
+ * it under the terms of the GNU Lesser General Public License as published by
+ * the Free Software Foundation, either version 3 of the License, or
+ * (at your option) any later version.
+ *
+ * Alfresco is distributed in the hope that it will be useful,
+ * but WITHOUT ANY WARRANTY; without even the implied warranty of
+ * MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+ * GNU Lesser General Public License for more details.
+ *
+ * You should have received a copy of the GNU Lesser General Public License
+ * along with Alfresco. If not, see <http://www.gnu.org/licenses/>.
+ */
+package org.alfresco.module.org_alfresco_module_rm.test.integration.issue;
+
+import java.io.Serializable;
+import java.util.HashMap;
+import java.util.Map;
+
+import net.sf.acegisecurity.vote.AccessDecisionVoter;
+
+import org.alfresco.model.ContentModel;
+import org.alfresco.module.org_alfresco_module_rm.action.impl.CompleteEventAction;
+import org.alfresco.module.org_alfresco_module_rm.action.impl.CutOffAction;
+import org.alfresco.module.org_alfresco_module_rm.capability.Capability;
+import org.alfresco.module.org_alfresco_module_rm.disposition.DispositionAction;
+import org.alfresco.module.org_alfresco_module_rm.test.util.BaseRMTestCase;
+import org.alfresco.module.org_alfresco_module_rm.test.util.CommonRMTestUtils;
+import org.alfresco.service.cmr.repository.NodeRef;
+
+
+/**
+ * Unit test for RM-1039 ... can't move a folder into a category with a disposition schedule
+ *
+ * @author Roy Wetherall
+ * @since 2.1
+ */
+public class RM1039Test extends BaseRMTestCase
+{
+    @Override
+    protected boolean isRecordTest()
+    {
+        return true;
+    }
+
+    // try and move a folder from no disposition schedule to a disposition schedule
+    public void testMoveRecordFolderFromNoDisToDis() throws Exception
+    {
+        final NodeRef recordFolder = doTestInTransaction(new Test<NodeRef>()
+        {
+            @Override
+            public NodeRef run()
+            {
+                // create a record category (no disposition schedule)
+                NodeRef recordCategory = filePlanService.createRecordCategory(filePlan, "Caitlin Reed");
+
+                // create a record folder
+                return recordFolderService.createRecordFolder(recordCategory, "Grace Wetherall");
+            }
+
+            @Override
+            public void test(NodeRef result) throws Exception
+            {
+                assertNotNull(result);
+                assertNull(dispositionService.getDispositionSchedule(result));
+                assertFalse(nodeService.hasAspect(result, ASPECT_DISPOSITION_LIFECYCLE));
+            }
+        });
+
+        final NodeRef record = doTestInTransaction(new Test<NodeRef>()
+        {
+            @Override
+            public NodeRef run()
+            {
+                // create a record
+                return fileFolderService.create(recordFolder, "mytest.txt", ContentModel.TYPE_CONTENT).getNodeRef();
+            }
+
+            @Override
+            public void test(NodeRef result) throws Exception
+            {
+                assertNotNull(result);
+                assertNull(dispositionService.getDispositionSchedule(result));
+                assertFalse(nodeService.hasAspect(result, ASPECT_DISPOSITION_LIFECYCLE));
+            }
+        });
+
+        doTestInTransaction(new Test<NodeRef>()
+        {
+            @Override
+            public NodeRef run() throws Exception
+            {
+                Capability capability = capabilityService.getCapability("CreateModifyDestroyFolders");
+                assertEquals(AccessDecisionVoter.ACCESS_GRANTED, capability.evaluate(recordFolder));
+                assertEquals(AccessDecisionVoter.ACCESS_GRANTED, capability.evaluate(recordFolder, rmContainer));
+
+                // take a look at the move capability
+                Capability moveCapability = capabilityService.getCapability("Move");
+                assertEquals(AccessDecisionVoter.ACCESS_GRANTED, moveCapability.evaluate(recordFolder, rmContainer));
+
+                // move the node
+                return fileFolderService.move(recordFolder, rmContainer, null).getNodeRef();
+            }
+
+            @Override
+            public void test(NodeRef result) throws Exception
+            {
+                assertNotNull(result);
+                assertNotNull(dispositionService.getDispositionSchedule(result));
+                assertTrue(nodeService.hasAspect(result, ASPECT_DISPOSITION_LIFECYCLE));
+
+                DispositionAction dispositionAction = dispositionService.getNextDispositionAction(result);
+                assertNotNull(dispositionAction);
+
+                assertNull(dispositionAction.getAsOfDate());
+                assertEquals("cutoff", dispositionAction.getName());
+                assertEquals(1, dispositionAction.getEventCompletionDetails().size());
+
+                // take a look at the record and check things are as we would expect
+                assertFalse(nodeService.hasAspect(record, ASPECT_DISPOSITION_LIFECYCLE));
+            }
+        });
+    }
+
+    // move from a disposition schedule to another .. both record folder level
+
+    // move from a disposition schedule to another .. from record to folder level
+
+
+    // try and move a cutoff folder
+    public void testMoveCutoffRecordFolder() throws Exception
+    {
+        final NodeRef destination = doTestInTransaction(new Test<NodeRef>()
+        {
+            @Override
+            public NodeRef run()
+            {
+                // create a record category (no disposition schedule)
+                return filePlanService.createRecordCategory(filePlan, "Caitlin Reed");
+            }
+        });
+
+        final NodeRef testFolder = doTestInTransaction(new Test<NodeRef>()
+        {
+            @Override
+            public NodeRef run()
+            {
+                // create folder
+                NodeRef testFolder = recordFolderService.createRecordFolder(rmContainer, "Peter Edward Francis");
+
+                // complete event
+                Map<String, Serializable> params = new HashMap<String, Serializable>(1);
+                params.put(CompleteEventAction.PARAM_EVENT_NAME, CommonRMTestUtils.DEFAULT_EVENT_NAME);
+                rmActionService.executeRecordsManagementAction(testFolder, CompleteEventAction.NAME, params);
+
+                // cutoff folder
+                rmActionService.executeRecordsManagementAction(testFolder, CutOffAction.NAME);
+
+                return testFolder;
+            }
+
+            @Override
+            public void test(NodeRef result) throws Exception
+            {
+                // take a look at the move capability
+                Capability moveCapability = capabilityService.getCapability("Move");
+                assertEquals(AccessDecisionVoter.ACCESS_DENIED, moveCapability.evaluate(result, destination));
+
+            }
+        });
+
+        doTestInTransaction(new FailureTest()
+        {
+            @Override
+            public void run() throws Exception
+            {
+                fileFolderService.move(testFolder, destination, null).getNodeRef();
+            }
+        });
+    }
+}