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PLEASE NOTE: JDK6 [is|was] formerly known as Project Mustang

In the previous sentence what is correct 'is' or 'was'? and why?

While reading a bug report I found this sentence with 'is' and now I'm wondering what is correct.

BUG 6399361

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Since the adverb "formerly" indicates a prior state, it usually occurs with a past tense verb. Therefore, most likely the correct choice is:

was formerly known as Mustang.

You may be able to construct a context in which is would be preferable, but this would be unusual.

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It depends on the function of the note. If the purpose of the note is to tell you about a change that has already happened, "was" is correct. If the purpose of the note is to actually make the change, then "is" is correct. In that case, there's an implied "now" (or "hereby") after "is".

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