A simple withdrawl from IRA is double taxed with capital gains. Why is that?

Capital gains?  A withdrawal from an IRA is not subject to capital gains nor is reported as being a capital gain.  Where are you see this?

When you enter the Form 1099-R the taxable amount of the withdrawal is entered on Form 1040 Line 4b as ordinary income and taxed at your current tax rate.

You do not pay taxes on capital gains in an IRA.

A distribution from a traditional IRA is always taxable income unless you had made and recorded nondeductible contributions.

You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free but earnings will be taxable if they are not Qualified Distributions.

Please answer all follow-up questions carefully after you entered your 1099-R.