What exactly are "Nondeductuble expenses from prior years"?

[Critter-3]

No ...  since you have no mortgage then that example doesn't really apply to you.   

So you are not at risk  if you have a line of credit that is NOT based on a property ... basically a "non recourse loan" where if you defaulted on the loan they would have no way to collect on the debt. 

[DaveLaQ]

So simply investing in improvements and paying maintenance bills isn't enough to be considered "at-risk"? Actually, we take a loss most years (with lots of carryovers) as we continue to fix up the place. Not the right kind of risk?

[Critter-3]

STOP  overthinking this  ... you ARE at risk since you don't have any non recourse loans on the property.  If the earth swallowed up the property you would lose everything. 

[DaveLaQ]

Okay, that's what I was thinking. It just wasn't coming across. That's what I get for being a layman.  :^)

It sounded like a mortgage would be needed to cause risk. I guess I misunderstood.

[DaveLaQ]

Layman's extra credit follow-up: How would a non-recourse loan help? The house could still be swallowed up, no? I'd still have some equity at-risk, no?