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Deductions & credits
Response to Q-1 --- in order to be able to use the safe harbor ( and keep 1116 out ) you would have to claim/ recognize ONLY the safe harbor amount. While you must recognize any and all foreign income, there is no such requirement for the foreign taxes paid. The form 1116 is not only complicated but its limitations often will result in less FTC for the year. My personal view is that because this area of statute is driven by treaty requirement of "ameliorating" the effects of double taxation it advertises " we recognize dollar for dollar " foreign taxes paid, the actual effect on the taxpayer is far less. So I always suggest ( especially when FT is not too far above the safe harbor ), try it both ways and see which is more beneficial to you.
Response to Q-2 ---- You are correct in your understanding.
Is there more I can do for you ?