During the first 200 years, it was a tavern, then a private residence, then a funeral parlor.

In 1959 the funeral parlor closed and the Patterson House in Leesburg, Va., like so many mammoth old buildings near town centers, became a derelict. Pigeons roosted in the eaves and a parade of tenants below sold everything from real estate to house plants.

In many communities in years past, houses like this on prime commercial land have been razed by developers seeking the quick profit of sanitary stacks of offices.

But in 1976, a new law, the Tax Reform Act, gave developers another option: to save rather than destroy. That law provides incentives for the owner of commercial property in historic areas to preserve the building and safeguard the heritage. The Patterson House is a good example of the law at work.

When the pre-Revolution fieldstone house came on the market last year, a young historic preservation consultant, Brown Morton, had just left his government preservation job and begun to search for an office within easy drive of his nearby Loudoun County home. The Patterson House seemed just right to restore as he began his private practice in the relatively new profession. He came at just the right time for the house.

The first step in rehabilitation was an architectural "dig" in the basement before the concrete was poured. One frigid day last February, Morton mustered friends to sift through the dirt of the original basement floor. They turned up 1,200 clay shards, bits of pottery and broken glass, which have been set aside for further study.

Upstairs, layers of paint were scraped away, and all walls and woodwork returned to their original colors. In the case of one second floor room, this produced sky blue woodwork. "A very popular 18th century shade," notes Morton.

Walls were repainted with a paint similar to whitewash, giving them a strained surface texture.

"Fortunately, the people who occupied this house took good care of it, and they never threw anything away," said Morton. That's in line with a favorite preservation philosophy: Don't make any changes that can't be undone at a later date.

All the original interior doors, some with wrought iron hinges still attached, were in the attic. He returned them to their original jambs. Where hinges were missing, he had copies faithfully reproduced. Morton even found and placed in their original positions two sets of 18th century window sashes.

By far the most striking preservation feature of the Patterson House is a series of pencil sketches on the plaster walls of the stairway leading to the attic. Men and women are shown, some in portrait and some full figure, often with identifying names inscribed in a delicate antique scrawl.

For years, Loudoun County legend held that these early American graffiti were the work of Hessian soldiers held prisoner in the attic during the Revolution. But the costumes, beards and hair styles place the drawings in the early 19th century. A recent series of coincidences dovetails with historical fact to provide an intriguing clue to their origin.

By 1825, the community had commemorated one of the area's most famous residents, Francis Lightfoot Lee, by changing the town's name from Georgetown to Leesburg.

The Revolutionary War champion, the Marquis de Lafayette, came though Leesburg in August 1825, to visit former president James Monroe at the nearby Oak Hill estate, and all the town turned out to greet him.

From the steps of the Patterson House, then operated as McCabe's Ordinary, Mayor John Henry McCabe greeted Lafayette and his entourage. Logic dictates that Lafayette's party was quartered in the rooms of the inn. A few years ago, an art historian touring Leesburg saw the sketches and remarked that they looked very much like those of a New England artist of the early 19th century, John William Jennys. Morton has learned that this artist accompanied Lafayette to illustrate news stories of his visit to America. Did Jennys spend the long summer evening sketching life portraits of the famous figures from American history who gathered to greet their hero? Or were the portraits the work of a later traveler?

Morton has put these intriguing questions aside until there is time to find an art historian to do research. In the meantime, the sketches have been protected by sheets of plexiglass.

Morton pointed out that many decisions fall into the category of rehabilitation, not restoration. "Like most old houses, the Patterson House (named for John and Fleming Patterson, who built it in 1762) has undergone substantial changes during its history," he said. "When you set out to preserve all of a building's current features, you preserve all of its past."

Worn floor boards in one corner and exposed ceiling beams strongly suggest that the southwest first floor room was the old tavern's taproom. There also is evidence that a window in this room was then a door opening directly onto the street.

The windows of this room and its companion across the center hall were originally set 42 inches above floor level. "If you were sitting in one of the public rooms, no one passing by on the street would be able to look in and see you," notes Morton.

After 1852, when the tavern became the residence of Charles Fadeley, the windows in these rooms were dropped 9 inches below the chair rail so he could see out when he sat in the front parlors. Shutters were added to the front windows, and the small paned 18th-century sashes were replaced by 19th-century sashes.

The design of the building's most dramatic feature, a bold 18th-century Modillian cornice, was adapted for the cornice of a front erected during this period.

These are changes that Morton has elected to leave intact. Remodeling for commercial use has required him to make changes of his own.

The most notable of these has been in the English basement. In order to help the house pay its way commercially, this previously unfinished area was transformed into a handsome suite of offices.

The original basement floor was dirt. Later, pine boards were laid down on joists on the ground, and when the house became a funeral home in the 20th century, part of this subterranean space was used for embalming. Morton poured concrete and covered it with vinyl flooring.

The original stone walls are preserved for texture as well as their enduring utility, but the old floor boards now form handsome paneling over the lower half of these walls. Morton was able to place all the new wiring for these rooms between paneling and stone walls.

When the house became a funeral parlor, it suffered a severe architectural loss: fireplaces and their mantels in two first-floor rooms were sacrificed for wall space. But the dramatic cone-shaped chimney supports in the basement are still intact, and Morton left them in place to add interest to the low-ceilinged rooms.

"In the basement I took greater liberties with the space because I was creating something new," he pointed out. "I preserved as much as it made sense to save, but I don't feel apologetic about such things as modern light fixtures. They are the only practical solution for the lighting this area."

The rear concrete steps were replaced with a simple but handsome wooden porch, steps and handrails. The design is based on the 18th-century posts and rails still to be found leading from the second floor interior hall to the attic.

When the funeral parlor opened, the original interior staircase from first to second floor was torm down and replaced -- the narrow widths of the 18th century would not accommodate the undertaker's coffins. Morton decided to leave the graceful 20th-century curved steps and banister intact. "Why build a fake 18th century staircase when this one is attractive?" he notes.

Morton's 12 years with the Department of Interior's historic preservation program took him all over the United States as far away as Nepal, Indonesia and Vietnam to advise governments on historic properties. As chief of the Technical Preservation Services Division in Interior's Office of Archeology and Historic Preservation, he also evaluated preservation work by private individuals in response to the 1976 Tax Reform Act incentives.

Now as a private consultant, Morton has recently served as a counsultant on the John Hough House in Leesburg, which has just received a 1979 historic preservation merit award from the American Institute of Architects, Washington Metropolitan Chapter. (See story on Page 1.) On such projects he advises the owner on not only the rehabilitation, but the Interior Department's certification and the preservation tax laws.

(Currently, he is giving advice on the restoration of the Philadelphia Museum's Lansdowne Room, by 18th-century designer Robert Adam. The room was damaged by chemicals in the museum's fire prevention system.)

"In many communities the preservationist is still a pioneer, but that wasn't the case for me," said Morton. "When I went to the local bank and told them what I wanted to do, they were delighted. They said, 'Just tell use how we can help.' I benefited from risks local property owners took years ago."

The survival of the Patterson House testifies to the preservation spirit in the surrounding community. The entire town of Leesburg, a National Historic District of more than 500 residential and commercial structures on 187 acres, was listed on the National Register of Historic Places in 1970.

Until the Tax Reform Act of 1976 there was very little incentive for preservation. Notes Morton, "The tax structure actually encouraged the developer to demolish and build a new structure. And there is still nothing to prevent a property like the Patterson House from being torn down or remodeled inappropriately."

Provisions of this law and other programs to aid the preservationist are described in "Source of Preservation Funding," from the Heritage Conservation and Recreation Service, U.S. Department of the Interior, Washington, D.C. 20240.

The exterior of the Patterson House may be seen at 4 East Loudoun St., Leesburg, and its owner says visitors are welcome to walk around back to see the building's facade much as it appeared in 1762, with shutterless windows, 18th-century sashes and original trim color.

"A Walking Tour of Leesburg," available at the Loudoun Museum, 16 West Loudoun St., is an excellent guide to viewing the town's historic district.