"Overloaded function signatures overlap with incompatible return types" false positive when there can be a subtype of both return types

from typing import overload, Literal

class A: ...

class B: ...

class C(A, B): ...

@overload
def foo(a: Literal[True], b: Literal[True]) -> C: ...

@overload
def foo(a: Literal[True], b: bool) -> A: ... # error: Overloaded function signatures 2 and 3 overlap with incompatible return types  [misc]

@overload
def foo(a: bool, b: Literal[True]) -> B: ...


def foo(a: bool, b: bool) -> object: ...

playground

Start with the minimal reproducer in the issue and inspect mypy's overload-overlap diagnostic for the three signatures involving A, B, and C. Confirm the behavior against the linked playground example, then add or update a regression test so compatible subtype return types no longer produce a false positive while genuine incompatible overlaps remain diagnosed.