As per Double Taxation Treaty between US and country 'A', pension earned in country A for services rendered to country 'A' AND taxed in country'A', is not taxable in the USA. But the FORM 1116 does not exempt that tax paid entirely.
It adds up US income & country 'A' income, calculates tax on total income(US+Foreign) at USA rate and DOES NOT give FULL credit of the tax paid in foreign country on foreign income!
That is violation of the treaty.
There has to be some way of handling this situation.
