The problem is that the “rectangle” was turned into a simple vector object at some point so it’s not actually a rectangle, just a vector object with the name “rectangle” and the look of a rectangle. This can happen if you modify it in the vector editing mode or press Cmd/Ctrl + E to flatten it. The difference that you can’t modify individual four corners in the right panel when a simple vector object is selected but can modify them on a rectangle.
Figma can only create Auto Layout objects from the objects that have the type Rectangle, and can’t do it with simple vector objects.
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