On June 19, 1994, at 1940 hours Pacific daylight time, a Mooney M20J, N201NK, lost power during takeoff from runway 26 at the Big Bear City Airport, Big Bear City, California, and ditched into the water of Baker Lake about 1,500 feet from the departure end of the runway. The airplane was being operated as a personal flight by the pilot/co-owner. The airplane was substantially damaged. The certificated private pilot and passenger were not injured. The flight was destined for Santa Monica, California. Visual meteorological conditions prevailed. Witnesses reported the loss of engine power was preceded by smoke coming from the engine cowling and they heard the engine missing. The airplane owner indicated this was the airplane's third flight after the annual inspection. The pilot had test flown the aircraft after the annual inspection and made a comment to the mechanic about the change in the leaning that seemed different. The mechanic stated that the timing shouldn't have been changed during the annual. The pilot stated that the trip up to Big Bear was uneventful with normal preflight, runup, and departure. The airplane's magneto was examined and oil was found in the capacitor. Disassembly of the magneto revealed the oil slinger ring was loose. Oil from the crankcase that lubricates the magneto gear on the camshaft can pass into the electrical portion of the magneto. The aircraft records indicate that the magneto was replaced on 4/15/94 with an overhauled unit.