On December 27, 1995, about 1100 hours Pacific standard time, a Lake LA-4-200 amphibian, N5LY, drug a wing in the water on takeoff from Folsom Lake near Folsom, California. The aircraft sustained substantial damage; however, neither the flight instructor nor his student were injured. The aircraft was being operated as an instructional flight by a private owner when the accident occurred. The flight originated in Sacramento, California, about 1030. Visual meteorological conditions prevailed at the time and no flight plan had been filed. The instructor reported that his student was in the process of practicing a confined area takeoff. After the aircraft came up onto the step, the student initiated a turn toward the right when the aircraft began skidding to the outside of the turn. To compensate for this condition, the instructor applied right rudder, right aileron, and reduced the engine power to idle. As the power was reduced, the aircraft came down off the step and settled into the water. When this occurred the instructor saw the left wing tip descend below the surface of the water and he responded by adding full power and leveling the wings. As the wings were leveled and power added the aircraft accelerated and lifted off. After becoming airborne the instructor observed skin damage to both sponsons. Satisfied that the aircraft was controllable in the air, but uncertain if the aircraft could be landed safely in the water due to the possibility of reduced buoyancy if the damage to the sponsons allowed them to take on water, the instructor decided to return to Natomas Field. Upon arrival at Natomas, the aircraft landed without further incident. A postaccident maintenance inspection revealed damage to both under wing sponsons, the nose gear door, internal bulkheads, and skin on the left wing.