Server and client can disagree on block placement range

Sometimes when placing a block as far away as possible, it will flicker into existence for a brief moment and then disappear again. This affects survival and creative. In survival the item pops back into your inventory.

To reproduce the problem, load the attached world and, without moving, place the anvil you are holding against the block you are looking at (the first stone block above the portal).

The bug first appeared in 1.3.