Taxes on BRRRR Cash-Out Refi?

[James Folsom]

Does anyone know if you have to pay taxes on the cash-out portion of a BRRRR property? I know that you pay taxes with capital gains on a flip. But wondering how taxes would work on a BRRRR property.

I'll give a scenario.  Let's say I purchase a $50k distressed home + $20k rehab with a construction loan from a short-term lender, and plan to pay back the short-term loan with the cash-out refi afer rehabbing.  There is a local Cincy credit union that will apparently do a 1-year rehab loan with 3% interest.  But lets also say that the cash-out value is more than the original loan...

Original Purchase Price $50,000

Rehab Budget: $20,000

Total Financed Amount: $70,000

ARV: $115,000

Cash out refi (70/30): $80,500

Closing costs, etc: $5,000

Original Loan payback (+3% interest): $72,210

NET: $3,290

So in this case, I know that the majority of my capital gain is now equity in the property, and I wouldn't pay taxes on it until I sell the property (and could still avoid with a 1031).  But do I have to pay taxes on the $3,290 or any portion of the investment for that matter?

Thanks!