diff --git a/pkgs/typed-racket-pkgs/typed-racket-test/tests/typed-racket/fail/pr12985.rkt b/pkgs/typed-racket-pkgs/typed-racket-test/tests/typed-racket/fail/pr12985.rkt
new file mode 100644
index 0000000000..b7e0ec8478
--- /dev/null
+++ b/pkgs/typed-racket-pkgs/typed-racket-test/tests/typed-racket/fail/pr12985.rkt
@@ -0,0 +1,12 @@
+#;
+(exn-pred 2)
+#lang typed/racket/base
+
+(define-type T (Rec T (U (Pair String T) (Pair Char T))))
+(define-type S (Rec S (Pair (U String Char) S)))
+
+(: f (S -> S))
+(: g (T -> T))
+
+(define (f x) (cons "string" (cons #\a x)))
+(define g f)