two CPA tax questions

mianmian

Dear all, I have a question about the personal holding company deductions in computing undistributed personal holding company income.

A personal holding company deducts federal income taxes. This sounds fine. But why does such company also deduct net long-term capital gain less related federal income taxes in computing undistributed personal holding company income? Federal income taxes are expenses, so there is no problem to exclude them from income, but why is capital gain excluded from income too?

Another question is about ordinary income dividends. I read a sentence like this: Distributions out of current and accumulated earning and profits are taxable as ordinary income dividends to non-corporate shareholders.

The question is: what kind of distributions is not treated as ordinary income dividends and what kind of dividends is for corporate shareholders? What would be the difference between these dividends if there are such?

Thanks a lot!