UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                    Washington, D.C.  20549
                          Form 10-K/A
(Mark One)

(X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934    (NO FEE REQUIRED)

For the fiscal year ended          December 31, 1996
                               or
(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934        (NO FEE REQUIRED)

For the transition period from                  to
Commission file number             0-13772

        USAA Income Properties III Limited Partnership
    (Exact name of registrant as specified in its charter)

       Delaware                         74-2356253
(State of Organization)   (I.R.S. Employer Identification No.)

    8000 Robert F. McDermott Fwy., IH 10 West, Suite 600,
                San Antonio, Texas  78230-3884
(Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code: (210)498-7391

Securities registered pursuant to Section 12(b) of the Act:

                                         Name of each exchange on
Title of each class                          which registered
       None                                        None

Securities registered pursuant to section 12(g) of the Act:

             UNITS OF LIMITED PARTNERSHIP INTERESTS
                        (Title of class)

Indicate  by check mark whether the registrant (1) has filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.                 Yes  X   No

Indicate  by  check  mark  if  disclosure  of  delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not be contained, to the best of registrant's knowledge,
in  definitive  proxy or information statements  incorporated  by
reference in Part III of this Form 10-K or any amendment to  this
Form 10-K.                                               [ X ]

State the aggregate market value of the voting stock held by non-
affiliates of the registrant:  Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the prospectus of the registrant dated May 6,
1985, as supplemented, filed pursuant to Rule 424(b) or (c) under
the Securities Act of 1933 are incorporated by reference in Parts
I and III.

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      Item 12 (a) (1) of the Registrant's Form 10-K for the  year
ended December 31, 1996 is deleted and amended in its entirety as
follows:

(1)    The  Amended and Restated Agreement of Limited Partnership
       provides that the General Partner will not be entitled  to
       vote  such Units on any matters submitted for the vote  of
       the  Limited Partners, unless applicable law requires  the
       vote of the General Partner in order for any action to  be
       taken  by  the Limited Partners to be effective,  in  such
       case  the General Partner will vote such Units in the same
       proportion  as  the other Limited Partners  voted  on  the
       proposed action.
                                
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<PAGE>                                
                           SIGNATURES

Pursuant  to  the  requirements of Section 13  or  15(d)  of  the
Securities  and Exchange Act of 1934, USAA INCOME PROPERTIES  III
LIMITED  PARTNERSHIP has duly caused this report to be signed  on
its behalf by the undersigned thereunto duly authorized:

USAA INCOME PROPERTIES III LIMITED PARTNERSHIP
(Registrant)

By: USAA INCOME PROPERTIES III, INC.,
General Partner

By: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President,
Chief Operating Officer
and Director

Date: October 9, 1997

Pursuant  to the requirements of the Securities Exchange  Act  of
1934,  this report has been signed below by the following persons
on  behalf  of the registrant and in the capacities  and  on  the
dates indicated.


/s/Edward B. Kelley                     Date: October 9, 1997
Edward B. Kelley
Director, Chairman of the Board,
President and Chief Operating Officer
of the General Partner


/s/T. Patrick Duncan                    Date: October 9, 1997
T. Patrick Duncan
Director, Vice Chairman,
Senior Vice President - Real Estate
Operations of the General Partner


/s/Randal R. Seewald                    Date: October 9, 1997
Randal R. Seewald
Director, Vice President,
Secretary and Legal Counsel
                                
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