The owner intended to put his aircraft on static display at the airport fly-in which was on the same airport. A friend informed the owner that he would like to fly the plane and the owner disclosed that it did not have a current inspection. The plane was fueled with 3 gal of gasoline and the owner suggested that his friend taxi it to the static display area. Witnesses reported that the aircraft took off on runway 18 and began a climbing left turn. One witness reported the engine lost power at about 150 ft AGL. The aircraft entered a steep turn and the nose began dropping. Reportedly, the pilot attempted to pull the aircraft up from a high sink rate. According to a nearby witness, the aircraft impacted in a flat attitude. An investigation revealed the outlet of the fuel tank was in the center/bottom of the tank. The owner believed that with only 3 gal of fuel, fuel starvation could occur in uncoordinated flight or steep climbs or dives. He believed there was 1 gal of unusable fuel in normal banks/careful climb.