UPDATE 1-HealthSouth posts net profit after year-ago loss

(Adds tax benefit, revenue, expense details, company comment)

NEW YORK, Nov 5 (Reuters) - HealthSouth Corp (HLS.N), a leading U.S. operator of rehabilitation hospitals, on Monday reported a third-quarter net profit after a year-ago loss, helped by a tax benefit and increased revenue from inpatient hospitals.

The tax benefit that added $281.1 million to the company's coffers was recovery of federal income taxes paid that HealthSouth did not actually owe. The taxes related to the artificially inflated profits reported from 1996 to 1999, which were the crux of a fraud scandal that brought the company to the brink of bankruptcy.

"Our income tax recovery was a great accomplishment," Chief Financial Officer John Workman said in a statement.

"The use of the proceeds from this income tax recovery allowed us to reduce our debt significantly," he added.

The Birmingham, Alabama-based company reported net profit of $287.6 million, or $3.13 per share, compared with a loss of $76.1 million, or $1.04 per share, a year ago.

Excluding items, the company had a loss from continuing operations of 40 cents per share.

Consolidated net operating revenue was $431.6 million for the quarter, up from $413.5 million a year ago and just shy of Wall Street expectations of $433.6 million, according to Reuters Estimates.

Operating expenses were about flat from a year ago, when the company recovered $35 million in incentive bonuses from former Chief Executive Richard Scrushy, who was ousted amid the massive accounting scandal that sent several HealthSouth executives to prison.

Scrushy was acquitted of wrongdoing in a jury trial despite testimony from several of his lieutenants about his involvement in the fraud.

Excluding the recovery from the year-ago quarter, operating expenses decreased by 7.7 percent with continued reductions in general and administrative expenses, and other costs, the company said. (Reporting by Bill Berkrot)