diff -u b/file_entity.pages.inc b/file_entity.pages.inc
--- b/file_entity.pages.inc
+++ b/file_entity.pages.inc
@@ -955,11 +955,6 @@
     }
   }
 
-  if(!empty($file->field_folder) && empty($form_state['values']['replace_upload'])){
-    $tname = taxonomy_term_load($file->field_folder['und'][0]['tid']);
-    $file = file_move($file,$form_state['values']['scheme'] . '://'.$tname->name,FILE_EXISTS_RENAME);
-  }
-
   file_save($file);
 
   $args = array(