8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                    FORM 8-K
                                 CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 14, 1999
 
                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
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             (Exact name of Registrant as specified in its charter)
 
Texas                                       0-14397           75-1991528
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(State or other jurisdiction of           (Commission      (I.R.S. Employer
incorporation or organization)            File Number)     Identification No.)
 
One Seaport Plaza, New York, New York               10292-0128
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(Address of principal executive offices) (Zip Code)
 
Registrant's telephone number, including area code: (212) 214-3500
 
                                      N/A
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         (Former name or former address, if changed since last report)


Item 5. Other Events.
 
   Prudential-Bache Properties, Inc., George S. Watson and A. Starke Taylor,
III, as general partners of Prudential-Bache/Watson & Taylor, Ltd.-3 (the
'Partnership'), have completed the liquidation of the Partnership's remaining
assets. On May 14, 1999, the Partnership made final liquidating distributions of
$12.15 - $19.78 per Unit (depending on the date of admission to the Partnership)
to taxable Unitholders and $31.77 - $39.56 per Unit (depending on the date of
admission to the Partnership) to tax-exempt Unitholders. These distributions
represented the remaining cash of the Partnership after the sale of its last
property and after payment of its remaining liabilities. As the distribution of
these amounts to the Unitholders of the Partnership represented the final step
in the liquidation of the Partnership, the general partners terminated the
Partnership effective May 14, 1999.
 
Item 7. Financial Statements and Exhibits.
 
   (c) Exhibit 99 Letter to Unitholders of Prudential-Bache/Watson & Taylor,
Ltd.-3
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                                   SIGNATURES
 
   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
 
Prudential-Bache/Watson & Taylor, Ltd.-3
(Registrant)
 
By: Prudential-Bache Properties, Inc.
    General Partner
 
     By: /s/ Stephen A. Tolbert                          Date: May 14, 1999
     ----------------------------------------------
     Stephen A. Tolbert
     Vice President
 
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EX-99

                    Prudential-Bache/Watson & Taylor, Ltd.-3
 
                                                                        May 1999
 
To our Unitholders:
 
   As you know, the Unitholders of Prudential-Bache/Watson & Taylor, Ltd.-3 (the
'Partnership') previously approved a plan of sale and liquidation, pursuant to
the Consent Statement dated September 17, 1996, providing for the sale of the
Partnership's assets, the liquidation of its liabilities and the distribution of
its remaining funds in accordance with the Partnership Agreement.
 
   The General Partners distributed substantially all of the Partnership's
assets to the Unitholders in November 1996 in the amount of $180 per Unit,
primarily consisting of net proceeds from the sales of most of the Partnership's
assets. On May 14, 1999, the Partnership made final liquidating distributions of
$12.15 to $19.78 per Unit (depending on the date of admission to the
Partnership) to taxable Unitholders and $31.77 to $39.56 per Unit (depending on
the date of admission to the Partnership) to tax-exempt Unitholders. These
distributions represented the remaining cash of the Partnership after the sale
of its last property and after payment of its remaining liabilities. The table
below shows the disposition of the Partnership's net assets from December 31,
1998 to May 14, 1999.
 
Net Assets - December 31, 1998                            $ 1,067,752
  Changes in estimated liquidation
     values of assets and liabilities                          47,927
  Cash distributions to Unitholders                        (1,115,679)
                                                          -----------
Net Assets - May 14, 1999                                 $      -0 -
                                                          -----------
                                                          -----------
 
   As the distribution of these amounts to Unitholders represented the final
step in the liquidation process, the General Partners terminated the Partnership
effective May 14, 1999. In early 2000, the General Partners will prepare and
file the final tax returns and distribute the final tax information on Schedule
K-1 for the Unitholders. Should you have any questions concerning the
liquidation of the Partnership, please feel free to contact your Financial
Advisor or call the Prudential Securities Client Services Department at
1-800-535-2077.
 
                                      /s/ Brian J. Martin
                                     -------------------------------
                                     Brian J. Martin
                                     President
                                     Prudential-Bache Properties, Inc.
                                     General Partner
 
         One Seaport Plaza, New York, NY 10292-0128 Tel: (212) 214-3500