diff --git a/src/checkers/inference/InferenceAnnotatedTypeFactory.java b/src/checkers/inference/InferenceAnnotatedTypeFactory.java
index 015664c61..254491027 100644
--- a/src/checkers/inference/InferenceAnnotatedTypeFactory.java
+++ b/src/checkers/inference/InferenceAnnotatedTypeFactory.java
@@ -579,5 +579,18 @@ public Set<AnnotationMirror> getTypeDeclarationBounds(TypeMirror type) {
         // If the declaration bound of the underlying type is not cached, use default
         return (Set<AnnotationMirror>) getDefaultTypeDeclarationBounds();
     }
+
+    /**
+     * Unlike the cases in type checking, in inference we should:
+     * (1) if the clause tree contains explicit annotation, return the corresponding @VarAnnot
+     * (2) otherwise, return the primary variable created for the clause
+     *
+     * @param clause the tree that represents an extends or implements clause
+     * @return the annotated type of the clause tree
+     */
+    @Override
+    public AnnotatedTypeMirror getTypeOfExtendsImplements(Tree clause) {
+        return getAnnotatedTypeFromTypeTree(clause);
+    }
 }
 
diff --git a/src/checkers/inference/InferenceTreeAnnotator.java b/src/checkers/inference/InferenceTreeAnnotator.java
index a52bd3934..40168f999 100644
--- a/src/checkers/inference/InferenceTreeAnnotator.java
+++ b/src/checkers/inference/InferenceTreeAnnotator.java
@@ -75,7 +75,7 @@ public InferenceTreeAnnotator(final InferenceAnnotatedTypeFactory atypeFactory,
 
     @Override
     public Void visitAnnotatedType(AnnotatedTypeTree node, AnnotatedTypeMirror atm) {
-        visit(node.getUnderlyingType(), atm);
+        variableAnnotator.visit(atm, node);
         return null;
     }
 
@@ -155,6 +155,11 @@ public Void visitIdentifier(IdentifierTree node, AnnotatedTypeMirror identifierT
                         }
                     }
 
+                } else if (parentNode.getKind() == Kind.CLASS) {
+                    // This happens when a class explicitly extends another class or implements
+                    // another interface
+                    variableAnnotator.visit(identifierType, node);
+
                 }
             }
         }
diff --git a/src/checkers/inference/VariableAnnotator.java b/src/checkers/inference/VariableAnnotator.java
index 506a4a59d..3de941444 100644
--- a/src/checkers/inference/VariableAnnotator.java
+++ b/src/checkers/inference/VariableAnnotator.java
@@ -513,6 +513,7 @@ private Slot addPrimaryVariable(AnnotatedTypeMirror atm, final Tree tree) {
             treeToVarAnnoPair.put(tree, varATMPair);
         }
 
+        atm.removeAnnotationInHierarchy(realTop);
         atm.replaceAnnotation(slotManager.getAnnotation(variable));
 
         return variable;
@@ -570,6 +571,11 @@ private Slot replaceOrCreateEquivalentVarAnno(AnnotatedTypeMirror atm, Tree tree
             varSlot = createVariable(location, atm.getUnderlyingType());
         }
 
+        if (realQualifier != null) {
+            // Remove the real qualifier in the atm, to make sure the source code
+            // is only annotated with @VarAnnot
+            atm.removeAnnotation(realQualifier);
+        }
         atm.replaceAnnotation(slotManager.getAnnotation(varSlot));
         return varSlot;
     }
@@ -773,8 +779,16 @@ private void handleClassDeclaration(AnnotatedDeclaredType classType, ClassTree c
             superTypes.get(0).replaceAnnotation(slotManager.getAnnotation(extendsSlot));
 
         } else {
-            final AnnotatedTypeMirror extendsType = inferenceTypeFactory.getAnnotatedTypeFromTypeTree(extendsTree);
-            visit(extendsType, extendsTree);
+            // Since only extends trees with a non-null tree path are handled (see
+            // checkers.inference.InferenceTreeAnnotator#visitIdentifier for more details),
+            // here don't dig deeper onto the extends tree when the classTree path is null.
+            // Note: the classTree path is null when the variableAnnotater is visiting it from
+            // a different compilation unit. The extends tree should be annotated when the
+            // compiler moves forward to the compilation unit containing the class definition.
+            if (inferenceTypeFactory.getPath(classTree) != null) {
+                final AnnotatedTypeMirror extendsType = inferenceTypeFactory.getAnnotatedTypeFromTypeTree(extendsTree);
+                visit(extendsType, extendsTree);
+            }
         }
 
 //        // TODO: NOT SURE THIS HANDLES MEMBER SELECT CORRECTLY
@@ -1617,16 +1631,16 @@ protected Boolean scan(AnnotatedTypeMirror type, Void aVoid) {
      * If it does not already exist, this method creates the annotation and stores it in classDeclAnnos.
      */
     private Slot getOrCreateDeclBound(AnnotatedDeclaredType type) {
-
-        TypeElement classDecl = (TypeElement) type.getUnderlyingType().asElement();
+        TypeElement classElt = (TypeElement) type.getUnderlyingType().asElement();
 
         Slot topConstant = getTopConstant();
-        Slot declSlot = classDeclAnnos.get(classDecl);
+        Slot declSlot = classDeclAnnos.get(classElt);
         if (declSlot == null) {
-            Tree decl = inferenceTypeFactory.declarationFromElement(classDecl);
-            if (decl != null) {
-                declSlot = createVariable(decl);
-                classDeclAnnos.put(classDecl, (SourceVariableSlot) declSlot);
+            Tree classTree = inferenceTypeFactory.declarationFromElement(classElt);
+            if (classTree != null) {
+                final AnnotatedDeclaredType declType = inferenceTypeFactory.fromElement(classElt);
+                declSlot = replaceOrCreateEquivalentVarAnno(declType, classTree, treeToLocation(classTree));
+                classDeclAnnos.put(classElt, (SourceVariableSlot) declSlot);
 
             } else {
                 declSlot = topConstant;
diff --git a/src/ostrusted/jdk.astub b/src/ostrusted/jdk.astub
index 266019462..4cb453a92 100644
--- a/src/ostrusted/jdk.astub
+++ b/src/ostrusted/jdk.astub
@@ -29,29 +29,6 @@ class System {
 	public static void loadLibrary(@OsTrusted String libname);
 }
 
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
+public class Object {
+    public @OsTrusted Object() {}
+}
diff --git a/testdata/ostrusted-inferrable-test/Bounds.java b/testdata/ostrusted-inferrable-test/Bounds.java
new file mode 100644
index 000000000..839d79d87
--- /dev/null
+++ b/testdata/ostrusted-inferrable-test/Bounds.java
@@ -0,0 +1,9 @@
+// Test case for issue 326:
+// https://github.com/opprop/checker-framework-inference/issues/326
+
+import ostrusted.qual.OsTrusted;
+
+@SuppressWarnings("inconsistent.constructor.type")
+// :: fixable-error: (declaration.inconsistent.with.extends.clause)
+class A extends @OsTrusted Object {}
+