Paying back a Family Member for Investment Property

[David Bergmann]

Hi everyone,

First post, and maybe a relatively newbie question.  Please go easy on me if that's the case!

A family member and I bought a property together for 50K (25K each).  We performed a renovation that cost in total 100K (50K each).  All in, we both have 75K a piece in the property.

This family member decided they would prefer to cash out, and let me take over rental property operations.  This was considered a win-win situation for both us and our goals (they are retiring and I am just getting started).

I secured a cash out refinance in my name in order to pay this family member (and myself) back.  House appraised for 215,000, so I had no issues with getting 150K cash out.  In this process, we removed family member from the deed (quit claim) so that I now have ownership and mortgage fully in my name.

I want to pay this family member as soon as possible but concerned how this transfer of funds will be taxed.  My question for the experts out there is how do I make this transaction happen and minimize taxes for the family member?  

Thanks so much for reading and responses!

David