The last update fixed this but no fully. You need to slowly ascend up to the water surface and you will clearly see for a split sec that you can see everything underwater. In 1.7.4 this problem doesn't happen at all.
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Confirmed for 10c
Confirmed for 14w11b
heh, I exploit this all the time.
Now, as for 1.7.5, even thought it's harder to do, it still exists. I'll post a screenshot. The threshold is just wider in 14w11b, while it is very narrow in 1.7.5