I worked half my life in the UK and half here, where I have lived as a US citizen since 86. This year I will receive a monthly Pension from the UK and which will be deposited into my UK bank account. I will transfer amounts at intervals to my US bank.

I learned on this site that I must declare my foreign income on my yearly IRS Tax Return. From what I see on the IRS site I must declare that income (and subsequent claims for tax relief on the tax I will pay the UK government) in US Dollars.

My question is;
As some of my cash stays in the UK, the tax I pay over there that never gets here and I will tranfer different amounts at different times throughout the year (with varying echange rates): What exchange rate would I use to tell the IRS a/ What my total UK income was for the year and b/ The tax I paid them (Form 116)?

You will convert U.K. income in U.S. dollars on the dates when you receive the pension amount. It does not matter if you send it to U.S. or not.

If you get these pension benfits on a monthly basis it is perfectly acceptable to take the yearly average of the $/£ conversion rate.

For example, for tax year 2008 the FX rate was .5449. In other words, one dollar is worth .5449 GBP. So you take your yearly benefit in £s and divide that by .5449. The resulting figure is the US dollar amount. You will also need to convert the tax you paid to Inland Revenue into dollars to do the Form 1116.

To get the historical rate on any currency go to: FXHistory - Historical Currency Exchange Rates