On June 28, 1998, at 1545 central daylight time, a Cessna 150H, N50433, experienced a loss of engine power during an initial climb during takeoff from the Osceola Airport, Osceola, Wisconsin. The flight instructor pilot and commercial pilot (student) received minor injuries. The airplane sustained substantial damage. The aircraft was being operated as an instructional flight under 14 CFR Part 91 and had been performing touch & go landings. Visual meteorological conditions prevailed and no flight plan was filed. The flight was departing with the intended destination of Blaine, Minnesota, when the accident occurred.. According to a written statement by the pilot, water was found while draining fuel during the pre-flight check. Several sumps were performed to remove water and contaminants from the fuel. The pilot stated they were very confident no water could be left in the system. After performing a touch and go landing at Osceola, Wisconsin, at 200 feet the engine sputtered and quit. The instructor took over the controls and conducted a forced landing. On rollout, the airplane impacted a road and nosed over. During a subsequent post accident investigation, a fuel sample taken from the gascolator revealed approximately 80% water in the sample. The inspector's report is attached as an addendum to this report.