It took a lot of help from tax breaks, but high-end homebuilder Toll Brothers ( TOL – news – people ) managed to turn a profit during its fiscal third quarter.

On Wednesday Toll Brothers reported its fiscal third-quarter earnings reached $27.3 million, or 16 cents per share, compared to the loss of $472.3 million, or $2.93 per share, reported in last year’s corresponding period.

Investors were pleased, as shares of Toll Brothers rose 2%, or 32 cents, to $16.51, in earl-morning trading. The company’s peers were mixed, as D.R. Horton ( DHI – news – people ), KB Home ( KBH – news – people ) and PulteGroup saw modest gains, while Lennar ( LEN – news – people ) traded to the downside. Hovnanian ( HOV – news – people ) was unchanged.

Wednesday’s report from the luxury builder is especially welcome as it follows Tuesday’s discouraging existing home sales figures, showing a 27.2% drop off in July from the prior month. (See “July Slump Paints Ugly Picture For Home Sales.”)

During the quarter the company pulled together $454.2 million in sales, below the $461.4 million reported in last year’s corresponding period.

“We were pleased to return to profitability this quarter, especially with volumes down 65% from our peak,” says Douglas Yearley, the company’s chief executive. “Although revenues and unit deliveries for the quarter were relatively flat compared to one year ago, our gross margin, before write-offs, improved by 350 basis points.”

Yearly adds that while much of this quarter’s profitability was due to tax benefits, he’s encouraged by the decline in impairments and our fifth consecutive quarter of more normalized cancellation rates after three years of elevated rates.

Toll Brothers’ cancellation rate was 6.2% during the quarter, below the 8.5% reported last year, representing the fifth consecutive quarter in which cancellation rates were consistent with historic norms. This new streak followed on in which saw 12 consecutive quarters of elevated rates.

The future, however, remains uncertain, but Robert Toll, the company’s chairman, plays the optimist, arguing that, despite the weak economic environment, the company is well positioned to take advantage of the market’s turnaround when it eventually comes.

Interestingly, on the back of Tuesday’s dismal sales report, most builders rebounded after the release. (See, “Crummy Home Sales Data Fail To Bury Builders.”)

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