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Doesn't the current implementation already pretty much give you all of this?

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The premise is that you could assign a "Location" to a task, whether it be a physical address or GPS coordinate.
I assign locations to tasks now, by assigning contexts to tasks that have a location assigned to the context.

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When you are out running errands and want to know if there is anything else nearby you can do, you can use the built in "Current Location" GPS function of the iPhone to track where you are and show a map of what other tasks are nearby. You could set limits to how far you are willing to travel (1, 5, 10, 25, etc.. mile radiuses).
Does all that now, other than one cannot set a limit on how far I am willing to travel. However, the list ranks the context's location from near to far, so I only need to scroll down the list as far as I am willing to travel.

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Since you can already set-up default contexts for projects, you could also do it for Locations. Anything that goes in my grocery list gets the default address of my grocery store.
Set up a grocery context, give it a location, and assign the context to the grocery list project. Everything added to the list will inherit the project's context, and by extension, the project's location.