I had an overseas assignment in 2005-2006. Foreign taxes were paid in 2006 but were not exhausted as a credit in that year. So carry over applied to 2007. Because of the way my overseas income was accounted for, some of it applied in 2007 as well. Now we come to 2008 and I have no foreign income, but there is still a carryover amount left from what was applied in 2006 and 2007. Can I claim this remaining carryover credit in 2008 with no foreign income? Form 1116 and Publication 514 seem to imply that I can't.

It may be odd to "answer" your own question, but given the number of views this post has had, thought it would be useful to pass on what the IRS told me yesterday. The net of the conversation is that if you have no foreign income source for a given year, you can not carry forward any remaining foreign tax credits from previous year. Simply put, any unused credit is lost unless you have foreign income during the carry forward years (up to 10). Guess I better get another overseas assignment soon.......