Would I have to give the 8k tax credit back if the house was being torn down?

My fiance and I are looking to purchase our first house. We found a really nice townhouse on a short sale; 130k when the value is at 180k, so obviously a good investment. The only thing is that we found out that the Dept of Transportation is making way for their new expansion project and will need to tear those townhouses down. This is 2-3 years down the road, everything with the title company has checked out and there isn’t anything standing in our way of purchasing the place. And since they need the property, we’d still be getting full market value of the property. The only question I have is that if one of the requirements to receiving the new home buyers tax credit is that we stay in the residence for 3 years, what happens if it gets torn down before that? Yes, that’s out of our control, but we’re going into this knowing that’s going to happen before hand. Would we have to pay it back? A unique situation; any insight?

The draft of the form 5405 says see instructions for this situation. The form and the instructions are supposed to be available tomorrow.

There are special rules–I think you can buy another house and continue the credit, but whether there is any recapture, I don’t know.

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