How to corporations pay taxes on stock they hold

Corporations would receive a 1099-DIV or 1099-B just like an individual to indicate the dividends and sales transactions that have occurred with their stocks.  This information would be included on their appropriate tax return for the year.

Under current law, the federal tax rate for corporate capital gain is the same as ordinary income: 21%.

It is more complicated if a corporation receives dividends from another domestic corporation. The topic is beyond the scope of this forum.

Generally, a US corporation may deduct 50% of certain dividends from other US corporations in determining taxable income. It is called the dividends received deduction (DRD). Different tiers of possible deductions depend on the ownership percentage of the distributing corporation.

Please refer to the IRS Publication 542 for more information.  

https://www.irs.gov/publications/p542#en_US_202401_publink1000257826

Is this corporation taxed as a C or S Corp? 

if a C-Corp

does it meet the definition of a personal Holding company under IRC 542

(a)General rule
For purposes of this subtitle, the term “personal holding company” means any corporation (other than a corporation described in subsection (c)) if—
(1)Adjusted ordinary gross income requirement
At least 60 percent of its adjusted ordinary gross income (as defined in section 543(b)(2)) for the taxable year is personal holding company income (as defined in section 543(a)), and

(2)Stock ownership requirement
At any time during the last half of the taxable year more than 50 percent in value of its outstanding stock is owned, directly or indirectly, by or for not more than 5 individuals. For purposes of this paragraph, an organization described in section 401(a), 501(c)(17), or 509(a) or a portion of a trust permanently set aside or to be used exclusively for the purposes described in section 642(c) or a corresponding provision of a prior income tax law shall be considered an individual.

a C-corp that is a PHC faces special taxes.