Now, you DO have those two layers set up so the upper layer provides the transparency, correct? I see you've applied effects to that layer. If indeed the upper layer provides the transparency, precompose it to preserve the proper Ae render order.
And kill the blend mode on that layer -- it won't do you any good.
And if you're unsure how to use track mattes, perhaps this might help:
To answer you question, yes. The layer on the top of the list is the original layer I wish to have pass through the layer that acts like a mask below it. In addition, the layer below it has effects applied to it so I can have a black and white image for that layer. The bottom layer has the gun object in pure white and the background in pure black. Here are some addition images that may explain my issue better.
Your layers are in the wrong order. The luma matte goes above the footage you want to cut out.