Tax liability on cash out refi

[John Lopez]

BP, please provide your insights on the following scenario: 

If I owned a property outright and did a cash out refinance where I pulled out 75% equity, my understanding is that would be a "non-taxable event". Then, following the cash out refinance, I signed the deed of the property over to another investor subject to the newly acquired loan. That investor then lease options the property to a home buyer over a 2 year term and the property is sold at the end of the term.  

In this scenario, it would seem that the tax liability would be on the investor to pay the taxes on the profit made during the lease option period and on the sale of the home, but what happens to the tax liability of the original owner that completed the cash out refi? does it vanish?

Thanks in advance for your response