On May 17, 1998, at 1251 central daylight time (cdt), a Great Lakes 2T-1A-2, N3803F, operated by a commercial pilot, sustained substantial damage when while maneuvering over Lake Vermilion, in Tower, Minnesota, the airplane's engine lost power. The airplane subsequently was ditched in the lake. Visual meteorological conditions prevailed at the time of the accident. The business flight was being conducted under 14 CFR Part 91. A flight plan was not on file. The pilot and the passenger on board reported no injuries. The local sight-seeing flight originated at Tower, Minnesota. In his written statement, the pilot said that he had just taken off from the airport at Tower, Minnesota. He was in a climb at 2,000 feet above ground level (agl) and 3 miles north of the airport when he began a turn to the east. During the turn, the airplane's engine began to cut in and out. The pilot said that he immediately made a turn back toward the Tower airport and pushed all of the engine controls forward. The engine continued to surge in and out and then finally quit. The pilot turned to parallel the shore line and touched down in the water about 100 feet from shore. The pilot said that before he took off, he checked the oil and the fuel float. He said that it appeared to be at the top. The airplane was recovered from the water on May 22, 1998. An airframe and powerplant mechanic examined the airplane in a hangar at the Tower Airport. The mechanic said that the airplane's engine cowling was broken upward. Both of the wheel pants had broken off. The airplane's lower right wing, to include all three spars, was bent aft and broken. The forward spar on the airplane's right top wing was broken. Both of the airplane's left wings, top and bottom, showed skin wrinkles. The cockpit area, main landing gear, and empennage showed minor damage. The airplane's fuel tank, fuel lines, engine, and propeller were undamaged. Flight control continuity was confirmed. Examination of the airplane's fuel system showed less than one quart of fuel between the fuel tank and the gascolator. Examination of the engine, engine controls and other airplane systems revealed no anomalies.