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In the following sentence, what does the pronoun it refer to?

A differs from B in that it is....

I read before that a pronoun refers to the closest name (B in that sentence); however, here it makes more sense that the pronoun it refer to A (not B).

I am totally confused when I read that sentence in an article. Please let me know your opinion.

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A is the subject of the sentence, and it is its pronoun, so it is A. In other words, the sentence could have been written as "A differs from B in that A is," but it's more elegant to use the pronoun "it," instead. Incidentally, "it" is not a preposition; it's a pronoun.

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It refers to A, the subject of the sentence. "B" is an object that receives an action from A. The pronoun refers to the subject, not the object. At least that's my take on it. There may be other ways to parse and describe the grammar. It would be better (unambiguous, at least) to write, "A differs from B in that A is (whatever)..."

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In this case, you're talking about A. So the it refers to A. Consider this alternate phrasing:

B is X. A differs in that it is Y.

Here, you can clearly see that it refers to A.

By inserting the prepositional phrase from B, we're not changing the subject so it still refers to A:

A differs (from B) in that it is Y.

You might find this description helful:

A pronoun should refer clearly to one, clear, unmistakable noun coming before the pronoun. This noun is called the pronoun’s antecedent.

So in this case, based on context, the antecedent is clearly A. (The in that indicates that what comes next is a description of how A differs.)

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