The Vertical Alignment is set to the default "Top" in the master document and the excerpt document. (I wasn't aware this setting existed.) Should it be something else? Could that affect just the one paragraph in 274 pages?

Re soft returns and indents: The document is set to automatically indent all new paragraphs. I only know two ways to suppress an indention: Use a "soft return" instead of a paragraph return ("hard return"?) just above any paragraph that you do not want indented (in this case "SMILE" and the 1st paragraph in the chapter). Or do it manually using the ruler function--but that seems the long way around.

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