Code Section 465 of the Internal Revenue Code defines ‘At-Risk’ as the financial value the taxpayer has in jeopardy related to the business activity the taxpayer is invested in as some form of an owner. Effectively, the taxpayer may only take losses on his tax return contingent on the loss being directly tied to invested dollars with some form of tax basis.
Recapture is a tax concept related to recovering of negative basis or excess depreciation. Recapture is usually accounted for at the point of the sale or disposal of the underlying asset related to the negative basis. This term is used when referring to At-Risk Rules and Passive Activity Losses.