diff --git a/lib/coffee-script/helpers.js b/lib/coffee-script/helpers.js
index 4750b2c0..da814aec 100644
--- a/lib/coffee-script/helpers.js
+++ b/lib/coffee-script/helpers.js
@@ -99,15 +99,18 @@
   };
 
   exports.invertLiterate = function(code) {
-    var line, lines, match;
+    var line, lines, maybe_code;
+    maybe_code = true;
     lines = (function() {
       var _i, _len, _ref1, _results;
       _ref1 = code.split('\n');
       _results = [];
       for (_i = 0, _len = _ref1.length; _i < _len; _i++) {
         line = _ref1[_i];
-        if (match = /^([ ]{4}|\t)/.exec(line)) {
-          _results.push(line.slice(match[0].length));
+        if (maybe_code && /^([ ]{4}|[ ]{0,3}\t)/.test(line)) {
+          _results.push(line);
+        } else if (maybe_code = /^\s*$/.test(line)) {
+          _results.push(line);
         } else {
           _results.push('# ' + line);
         }
diff --git a/lib/coffee-script/lexer.js b/lib/coffee-script/lexer.js
index de813b79..eaee4808 100644
--- a/lib/coffee-script/lexer.js
+++ b/lib/coffee-script/lexer.js
@@ -512,9 +512,6 @@
       if (indent) {
         doc = doc.replace(RegExp("\\n" + indent, "g"), '\n');
       }
-      if (this.literate) {
-        doc = doc.replace(/\n# \n/g, '\n\n');
-      }
       if (!herecomment) {
         doc = doc.replace(/^\n/, '');
       }