I checked the IRS 8936 instruction again and it still doesn't give me a clear answer on that part.  I tried the Basis reduction on line 9, also contacted intuit technical support for why I can't enter any number on line 9 as soon as I mark line 4 yes, 7500 transfer to dealer on.  So perhaps the 8936 form isn't meant to put the EV 7500 credit advance in repayment.  I looked on the IRS official website and this is what they stated below.  If that's the case then it answered my question where my client is only suppose to receive $166 EV credit, but then he transferred $7500 to the dealer and therefore my client nor the dealer is subject to the excess EV tax recapture.  I also tried to see if I can manually enter the 8936 recapture on 1040 schedule 2, line 1b and the program won't let me override.  I guess I don't need to worry about anything as long as the EV VIN match with the IRS database as they stated below the excess credit don't need to paid back.

Q4. What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)

A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.