That is certainly too close. I have heard of people breeding a dog or bitch back to a dam or sire respectively to see what recessives the dog has. But they should have let you know that before you agreed to the purchase. And there has to be a good reason to do it, and even then it is a gamble.
What you have is a 1-2 in-breeding.
Incest is not a word we associate with dog breeding. A dog's moral structure is not set up to follow or not follow an incest taboo. If a dog has opportunity, he will breed with any close relation -- no shame or guilt associated. It is up to breeders to ensure that doesn't happen, or if it does for whatever reason to find out what they want to know and be responsible for any problems that it is much more likely to reveal.
Jenna, RN CGC & Babs, CD RA CGC HIC
Heidi, RA CGC
SG3 Odessa, SchH1, Kkl1, AD
Ninja, RN CGC & Milla, RN CGC
Joy, Star Puppy, RN CGC
Dolly CGC & Bear CGC