1.Yes, the credit is based on foreign income over total income. Foreign tax credit can be carried back one year or carried forward up to 10 years so you want to keep track of your credits and which year is used. See Topic no. 856, Foreign tax credit.
2. This credit can only go against foreign income. You may income from other investments - like a brokerage.
3. The Form 1116, Foreign Tax Credit (Individual, Estate, or Trust) page 2, part III, line 10 covers carryforward and carryback. It also has calculating the credit which varies each year based on your foreign income.
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