On January 19, 1997, about 1630 eastern standard time, a Grumman AA-5B, N81307, registered to Pyramid Scaffold Service, Inc., had a wheel fire during taxi for takeoff at Rowan County Airport, Salisbury, North Carolina, while on a Title 14 CFR Part 91 instructional flight. Visual meteorological conditions prevailed at the time and no flight plan was filed. The aircraft was destroyed and the commercial-rated flight instructor and dual student were not injured. The flight originated from Concord, North Carolina, the same day, about 1545. The dual student stated they landed on runway 20 at Rowan County Airport and started to taxi back to the departure end for takeoff. During taxi he had to hold right rudder and brake to maintain taxiway center line. He mentioned to the instructor that he thought the left brake was sticking. The instructor took the controls and thought they had a flat tire. They stopped on the taxiway and the instructor got out and checked the tires, which appeared normal. The instructor got back in and taxied the aircraft about 2,000 feet toward the departure end of the runway and then did a 180-degree turn and taxied back about 2,000 feet. He then did another 180-degree turn and taxied to the hold short line at the departure end of runway 20. The drag on the left wheel was less at higher speeds and they knew a mechanic was not available to look at the aircraft so they decided to return to the departure airport. As they were stopped they observed smoke coming from the left main gear wheel pant. They shut down the aircraft and got out. They observed the left main wheel was on fire. Attempts to put the fire out with a canopy cover were unsuccessful, and the fire spread and destroyed the aircraft. Postaccident examination of the left and right landing gear wheel bearings, brake pads and brake disc was performed by NTSB. The left and right brake calipers were destroyed by the fire. The left wheel bearings had sustained some fire damage and had fire debris in the rollers. The bearings did rotate slightly and the rollers had no damage consistent with overheating or failure during operation. The left brake pads were worn to the point the attaching rivets were exposed and worn down and a piece of one pad had broken off. The left brake disk had deep grooves cut into it. Examination of the right landing gear wheel bearings showed they had no damage consistent with overheating or failure during operation. The right brake pads had no damage from operation and had an acceptable amount of pad remaining. The right brake disc had normal wear.