I thought he was getting ready to break out the hand cream...

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Your ground strap is missing.
If you are talking about the area I circled, that's what my brand new output shaft looked like from Toyota.
It looked to have been formed that way from the factory.
Transfer Case Assembly with Pictures
I'm slooowly assembling an h55/Toybox/TCase in my garage. I bought a used tcase to minimize my truck's downtime. I'd never disassembled a tcase so I was stumped for a while understanding how it worked and went back together. I wished I had some pictures of how all the big parts fitted together so I shot some. I'm ready to seal it up, so please let me know if anything doesn't look right.
EPC calls it a "Plate Washer" (for Speedometer Gear Drive)
Part # 90201-35002 '82-'87
so what effect will it have if I don’t use this washer?
Not much, I would say. My transfer came to me without it, there was some wear on the face of the speedometer drive gear but nothing significant.so what effect will it have if I don’t use this washer?