"Copy Local" does not copy assemblies to output directory

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I have an assembly X that is referencing System.Interactive and System.Reactive from a lib folder. Then I have assembly Y that is referencing X.

In X for both, System.Interactive and System.Reactive, 'Copy Local' is set to true. In Y for X 'Copy Local' is set to true. System.Reactive and System.Interactive are not in the GAC.

When I build Y, System.Interactive and System.Reactive are not copied to the output directory. Why?

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