A more thorough explanation:

Definition: At-risk rules are limitations set by the government on the amount of deductible losses a taxpayer can claim. These rules prevent taxpayers from using losses to reduce their taxable income beyond what they could actually lose.

For example, let's say a taxpayer invests $10,000 in a business venture. If the business fails and the taxpayer loses all $10,000, they can deduct the full amount of the loss on their tax return. However, if the taxpayer only invested $5,000 of their own money and borrowed the other $5,000, they can only deduct up to $5,000 of the loss on their tax return. This is because they are only at risk for losing the $5,000 they invested, not the full $10,000.

Another example would be if a taxpayer invests in a real estate partnership. If the partnership incurs losses, the taxpayer can only deduct their share of the losses up to the amount they are at risk for losing. If the taxpayer is only at risk for losing $20,000, they cannot deduct more than $20,000 of the partnership's losses on their tax return.