foreign capital gain adjustments and foreign tax credit

[cl2019]

taxpayer has some foreign long term capital gain from sale of private equity investment. He also has US long term capital gain. That all he has for capital gain/loss worldwide.
I understand that he needs to adjust the foreign capital gain before inputting it into line 1a of form 1116 but can anyone help check if my following understanding is correct?
1. the foreign capital gain is passive income category
2. the taxpayer's taxable income on 1040 is over $700k, so, the foreign capital gain is supposed to be taxed at 20% rate supposing no special 25%, 28% tax rates apply. Therefore, the foreign capital gain needs to be multiplied by 0.5405 to be input on line 1a of form 1116.

If all these are correct, the foreign tax credit calculated is only about 1/4 of the US tax this foreign capital gain generates.

Am I missing anything here?

Thank you so much!

[jklcpa]

The idea of this calculation and limitation is to adjust for the difference between between our ordinary tax rates and the capital gain rates that a foreign gain is actually being taxed at.  It sounds like you are doing it correctly though. 

If you'd like to read a more detailed explanation of how and why this is done, I've linked to an article from The Tax Advisory that delves into all of this.  Keep in mind that the article is several years old and the multiplication percentages for the rate differential calculation are different now, but the overall concepts are still valid:

https://www.thetaxadviser.com/issues/2017/jul/foreign-capital-gains-losses.html

[cl2019]

Thank you for the info.