During a leak down test on a 4 cylinder 20lbs of air was applied to no3 cylinder air came out of no 1 plug hole unknown if either cylinders were at TDC at the time how could this have happened?

Answer 1

Well, there are several possibilities. The most likely is that the head gasket is leaking badly, allowing pressure to vent between cylinders. Another possibility is that the head is cracked, which is how the pressure is traveling from one cylinder to another. The least likely possibility is that the block is cracked, but it would have to be cracked severely for pressure to travel from #3 to #1. Definitely you will have to remove the head, at least to replace the head gasket.