Your investment is considered an At-Risk investment for:
- The money and adjusted basis of property you contribute to the activity, and
- Amounts you borrow for use in the activity if:
- You are personally liable for repayment or
- You pledge property (other than property used in the activity) as security for the loan.
Amounts Borrowed. You are At-Risk for amounts borrowed to use in the activity if you are personally liable for repayment. You are also at risk if the amounts borrowed are secured by property other than property used in the activity. In this case, the amount considered at risk is the net fair market value of your interest in the pledged property.
The net fair market value of property is its fair market value (determined on the date the property is pledged) less any prior (or superior) claims to which it is subject. However, no property will be taken into account as security if it is directly or indirectly financed by debt that is secured by property you contributed to the activity.