NovaStar Financial earned $44.4 million in the first quarter thanks to an $84.2 million one-time tax gain tied to the subprime lender ending its REIT status next year.Without the one-time gain the Kansas City-based lender lost $39.8 million in the quarter. In the same period last year it earned $22.4 million. NovaStar funded $1.4 billion in the first quarter, a 21% decline from the same period last year. In a statement company chief financial officer Greg Metz explained the tax gain relates to "tax deductible temporary differences at the REIT that will reverse in 2008 and future years when the company will be a taxable entity." The market greeted NovaStar's earnings news positively, sending its shares up 7% to just under $7 a share in early afternoon trading on May 11.

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