Form 1116

Do we have to file form 1116 even when the adjustments/exemptions on form 2555 result in your 1040 showing that you have no taxable U.S. income?  Fun, fun, fun 

If the 2555 removes all taxable income, then there's no need to file 1116. 

Nonetheless you may wish to prepare and file the 1116s if:

1. You have regular or AMT carryovers,
2. You have excess credits to carry back, or
3. You want to minimise audit risk.

Guya,

I don't think a 1116 or lack thereof reduces audit risk, it may in fact increase it if it's a zero result with no CF or CB (ditto AMT) since it obfuscates the return.  I don't know for sure, however, as I've not seen any internal IRS documents on audit triggers for many years.  Do you have a good website for this?   

I agree with your other two points.  As a matter or course I always do one, since my tax programme optimises between the 2555 and the 1116, allowing me to determine the absolutely lowest tax with full certainty.

Tax Fun Time:

You may like reading the IRS 2005 Data Book for audit stats:  http://www.irs.gov/taxstats/article/0,,id=102174,00.html

Alas, it doesn't have anything about triggers, just the results of all the audits.

... with apologies to American Freak for taking over your post to talk shop.

YES! Oh yes! This is good news indeed!

I must now officially declare that Lizzit ROCKS