According to IRS Publication 925, if the amount you have at risk in any activity at the end of any tax year is less than zero, you must recapture at least part of your previously allowed losses.

What is the at risk rule?

What Are at-Risk Rules? At-risk rules are tax shelter laws that limit the amount of allowable deductions that an individual or closely held corporation can claim for tax purposes as a result of engaging in specific activities–referred to as at-risk activities–that can result in financial losses.

What is the difference between tax basis and at risk basis?

The amount you have at-risk is similar to basis in that you cannot deduct losses in excess of your at risk amount. The amount at-risk, however, is not the same as basis. In many cases, a taxpayer can still have basis, but his losses are not deductible because they are limited by the amount at risk.