Ah, "the internal representation" was meant to refer a hypothetical representation, rather than literally to CPython's actual implementation, but now that you point it out, I agree my wording is ambiguous. I like Tim's suggested replacement:

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4. Performing these calculations with at least one extra sign extension bit in a finite two's complement representation (a working bit-width of ``1 + max(x.bit_length(), y.bit_length()`` or more) is sufficient to get the same result as if there were an infinite number of sign bits.
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