US mutual fund investors could be hit with a record $350bn capital gains tax bill because their funds took big profits from rising stock markets last year.

Under US law, the fund itself does not pay gains tax, but passes the tax bill onto its investors, who are required to include the amount in their tax return each year. That means fund investors must pay tax on their funds’ capital gains – or take the losses – each year, even if they have not sold their fund shares.