@Ric G: "I discovered that this not only occurrs when trying to create a virtual copy in a Smart Collection, it happens when you try it in a Collection Set. It interesdting to note that Lightroom will happily undo the creation of this nonexistent virtual copy and report that it has done so." When you make a virtual copy, it always appears in the same folder as the original. When you have a smart collection selected as the current source, select a photo in that smart collection, and create a virtual copy, the virtual copy also appears in the smart collection, since it will have all the same metadata and attributes as the original. The one exception is if the smart-collection rules specifically exclude virtual copies. When you have a collection set selected as the current source, select a photo, and make a virtual copy, the copy will appear in the folder only, not any of the collections contained in the collection set. This is because in general, LR doesn't know in which contained collection it should place the virtual copy (if the photo is in more than one collection). If you're not observing this, then please post details about exactly what you're doing, including full-resolution screenshots (not phone pics) of the entire LR window.
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