The correct answer is option 4: Liver. The liver is an important organ in the body that carries out various functions, including the synthesis and breakdown of cholesterol. Cholesterol is a type of fat that is essential for the proper functioning of the body. The liver is responsible for breaking down fats obtained from the diet and converting them into cholesterol.

The liver plays a crucial role in regulating cholesterol levels in the body. It produces cholesterol as needed and also removes excess cholesterol from the bloodstream. This process helps maintain a balance of cholesterol in the body.

Option 1: Kidneys are responsible for filtering waste products from the blood, but they do not break down fats to produce cholesterol.

Option 2: The heart is a muscular organ that pumps blood, and it does not break down fats to produce cholesterol.

Option 3: Lungs are involved in the exchange of oxygen and carbon dioxide during respiration and are not directly involved in the synthesis or breakdown of cholesterol.

Therefore, the liver is the organ in animals that breaks down fats to produce cholesterol.