Report that you received zero for round 1, since it was returned. Turbotax will give him the recovery rebate of $1200 for round 1 plus $600 for round 2. This is correct--under the law, any "taxpayer" is entitled to the rebate, and your father-in-law is a taxpayer for 2020 if he had income and you are filing his final return. Yes, this is different than what the IRS said last year, but that's bureaucracy for you.
