What is the primary purpose of a tax shelter in real estate investment?

The primary purpose of a tax shelter in real estate investment is to reduce or avoid income taxes. A tax shelter provides investors with financial strategies that allow them to defer or eliminate tax liabilities associated with income generated from their investment properties. This can include deductions for depreciation, mortgage interest, and other expenses that can offset taxable income. By utilizing these benefits, investors can enhance their overall financial position, allowing for greater investment potential and profitability.

While increasing property value, generating rental income, and protecting against market loss are important aspects of real estate investing, they do not directly pertain to the specific function of a tax shelter in minimizing tax exposure. Tax shelters are primarily focused on the tax implications of real estate investment, which is why the second choice is recognized as the correct answer.