@snwong79 -- yes I am.
(a) the gross foreign income for purposes of form 1116 is the foreign income ( in your case the gain in your investment.
(b) if the Philippines tax is based on anything other than income / gain ( as you say -- zone where the property is ) then I would consider this as a form transfer tax and not capital gain --- thus this tax should be treated as an expense of the sales process --- this should take away the need for foreign tax credit , form 1116 and reduce your capital gain. And so all the adjustments etc. fall away.
Does this make sense ?
