An apartment complex purchased and held by an investor renting space to tenants is classified as what type of property for federal income tax purposes?

The correct classification of an apartment complex that an investor purchases and rents out to tenants for federal income tax purposes is best described as investment property. This designation accurately reflects that the primary goal of the investor is to generate income through rental payments, which is often the case for real estate assets intended for generating returns.

Investment properties are typically real estate holdings that are not used for personal use but rather for generating revenue through renting, leasing, or other means. This aligns specifically with the nature of owning an apartment complex, where the investor's primary objective is to earn income from tenants.

In contrast, while "business property" may seem relevant, it typically refers to property used in the operation of a business rather than primarily for investment purposes. Personal property is often classified as movable property that is not permanently attached to or part of real estate, which does not apply to an apartment complex. Rental property is somewhat synonymous with investment property, but for tax purposes, "investment property" is the more precise term that captures the intent behind the ownership and use of the complex. Thus, investment property is the correct classification.