Final answer:
Net capital losses deducted during the year diminish aggregate investment income according to ITA 129(4). These losses offset capital gains and reduce taxable investment income.
Step-by-step explanation:
According to ITA 129(4), what diminishes aggregate investment income? The answer is B) Net capital losses deducted during the year. In the context of taxation and investment, net capital losses reduce the aggregate investment income because they offset the capital gains that contribute to this income. When net capital losses are deducted, they effectively decrease the taxable investment income, and as a result, reduce the overall aggregate investment income.
It's important to realize that governments often use the tax system to influence investments and corresponding economic growth. Low capital gains taxes are one such example of an incentive to encourage investment. Conversely, if these incentives are removed or taxes are increased, investment may become less appealing and could potentially lead to reduced aggregate investment income.