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Passing arguments by reference can be beneficial in situations where: 1. Modifying the input data directly: When the purpose of the function is to modify the input data directly without having to return a new value, passing by reference allows the function to make changes directly to the original variables. 2. Handling large data: If the input data is large, copying it for passing by value would be expensive in terms of time and memory. Passing by reference avoids this overhead, making the function more efficient. 3. Multiple return values: When a function needs to return more than one value, passing by reference can be used to store results directly in the function arguments without having to create a custom return type. An example of passing by reference is swapping two numbers using a function that takes their addresses (pointers) as arguments, modifying the original variables without having to create a temporary variable or return a new value.