Which type of property is held primarily as an investment to generate income?

Investment property is indeed defined primarily as property held for the purpose of generating income. This type of property is often purchased by investors with the intent of earning rental income or capital appreciation. The key characteristics of investment property include its usage for income generation, such as through leasing or renting to tenants, and its potential for value increase over time.

In contrast, special-purpose property is typically designed for a specific use, like schools or churches, and is not primarily focused on generating income. Recreational property is usually utilized for leisure activities and may not consistently produce income. Residential property, while it can sometimes be viewed as an investment, encompasses a broader category that includes homes intended for personal use or living, rather than solely for income generation.

Therefore, investment property stands out as the correct choice because of its distinct purpose centered around financial returns for the owner.