By Helen Chernikoff

NEW YORK (Reuters) - U.S. luxury homebuilder Toll
Brothers Inc beat Wall Street expectations and reported
its first profit in three years Wednesday, sending its
shares up nearly 3 percent in early trading.

Helped by tax gains and lower writedowns on land values,
Toll reported fiscal third quarter net income of $27.3 million,
or 16 cents per share, compared with a loss of $472.3 million,
or $2.93 per share, a year earlier.

Excluding a tax benefit of $26.5 million related to changes
in accounting estimates, the company broke even, while
analysts, on average, had expected a loss of 14 cents a share,
according to Thomson Reuters I/B/E/S.

Some analysts, however, may have included the tax benefit
that Thomson Reuters I/B/E/S stripped out.

Toll's orders fell 16 percent, although even that was
better than many analysts had anticipated.

The National Association of Realtors reported on Tuesday
that sales of used homes fell 27.2 percent in July from June to
their slowest pace in 15 years.

"Recent economic and political news continues to dampen our
customers' confidence," said Executive Chairman Robert Toll in
a statement.

But the company transcended the weaker housing environment,
primarily because they took only $12.5 million in writedowns on
land that lost value, far less than analysts had anticipated
and down from $115 million a year earlier.

The sharp drop in impairments is to the company's credit,
said Morningstar analyst Mike Gaiden, because it means Toll was
smart enough to identify and mark down its weakest assets

But operations played a role in the surprise profit, too,
Gaiden said.

Revenue slipped 2 percent to $454.2 million, but that was
still much better than he and other analysts had anticipated,
generating better-than-expected margins, especially as the
company did a good job holding down administrative costs.

"When things normalize, this company is in a very good
position to deliver sound profitability," Gaiden said.

Horsham, Pennsylvania-based Toll Brothers builds in 21
states, with a focus on the move-up market.

Toll shares, which have fallen about 32 percent in the last
four months, touched a 52-week low of $15.57 Tuesday but were
up 2.8 percent at $16.64 in early trading Wednesday.
(Reporting by Helen Chernikoff; additional reporting by
Archana Shankar in Bangalore; editing by John Wallace)