If you (top screen) jump into lava, then the item in your hand will not burn. Instead, the item in the other player (bottom screen) will burn regardless if he is a hundred miles away from lava!
Recreating is very simple and you need an Xbox, an item each, a friend, some lava and creative mode so you don't die.
Cleaning up old tickets: This ticket has not been updated recently (~1 year+) so is being closed as Cannot Reproduce. If you feel this is still a valid issue then please comment, or create a new ticket following the Issue Guidelines.
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