isinstance check does not narrow inferred type correctly on nested Union type

[betaveros]

from typing import Union

class A: pass
class B: pass
class C: pass

def foo(bar: Union[Union[A, B], C]) -> None:
    if isinstance(bar, A):
        reveal_type(bar)
    else:
        reveal_type(bar)

The last line reveals Union[A, B, C] when it should be just Union[B, C]. It works if the type of bar is replaced by Union[A, B, C].

(Of course you'd probably never directly write Union[Union[A, B], C], but it's reasonable to write Union[AB, C] where AB is an alias for Union[A, B]. And the typing module documentation says Unions of Unions are flattened.)

[gvanrossum]

Is this still failing on master?

[ilevkivskyi]

Yes, I just checked this. Probably this is because interaction of restrict_subtype_away and is_proper_subtype misses the case of nested unions.