You didn't say what tranny you had, and it's not unreasonable that it could have been damaged by towing.
But for the tranny to have been damaged, the transfer case HAD to NOT be in neutral and was turning the tranny.
Yet, your transfer case likely had an internal oilpump driven by the output shaft, which would have been operating just the same is if the vehicle was proceeding under it's own power.
So what was different between it being towed vs. being driven that destroyed the transfer case???
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Today's Featured Article - An Old-Time Tractor Demonstration - by Kim Pratt. Sam was born in rural Kansas in 1926. His dad was a hard-working farmer and the children worked hard everyday to help ends meet. In the rural area he grew up in, the highlight of the week was Saturday when many people took a break from their work to go to town. It was on one such Saturday in the early 1940's when Sam was 16 years old that he ended up in Dennison, Kansas to watch a demonstration of a new tractor being put on by a local dealer. It was an Allis-Chalmers tractor dealership,
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