1. You will report the 1099-B but change the basis to the correct amount.
2. The credit is claimed on Form 1116. See About Form 1116, Foreign Tax Credit Page 2 shows taxes eligible for credit. Beware the special issues with tax treaties and pub 514. See About Publication 514, Foreign Tax Credit for Individuals
3. If you claim a credit on schedule 3, line 1 it will carry to your 1040 and reduce your liability. If the US tax is lower than what you paid, the credit will be the US tax which would negate the tax on the sale.
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