On November 19, 1998, at 1450 hours Pacific standard time, a Mooney M20F, N3500X, experienced a loss of engine power after takeoff from the Cable Airport, Upland, California. The pilot returned to the airport and made a forced landing diagonally across the runways before coming to rest on a taxiway. The airplane, operated under 14 CFR Part 91, was destroyed. The private pilot/owner received minor injuries, and a passenger received serious injuries. Visual meteorological conditions existed for the personal flight that was scheduled to terminate at the North Las Vegas, Nevada, airport. The pilot reported that after takeoff, at 200 feet above ground level (agl), the engine began to sputter. He leveled the airplane and the engine ran smoothly. He turned crosswind and announced his intention to do a closed traffic pattern. After turning downwind the engine stopped running. The pilot reported that the terrain was primarily buildings and rough fields. He thought he could make the runway at midfield and flew a 70-degree angle to runway 6. While attempting to line up with the runway, the airplane lost altitude and the right wing tip impacted the ground followed by the propeller, the nose, and then the fuselage. The pilot stated that the airplane slid approximately 250 feet before coming to rest and he and his passenger exited the airplane. The airport manager, a witness to the accident, stated that while in his office he heard a power change from an airplane that had just taken off. He then heard on the radio that the pilot was returning to the airport due to a problem. The airport manager dialed 911, and then walked outside. He stated that he saw the accident airplane approximately mid-downwind make a 90-degree turn to the runway and attempt an upwind landing. The right wing struck the ground and then the left wing. The airport manager further reported that the accident airplane had been parked outside in transient parking for 2 weeks, during which time it had rained. He stated that he had witnessed the inspection of the O-rings on the fuel caps and they showed evidence of deterioration. According to witness statements, during the pilot's run-up, the airplane had quit. They also noted that it had rained in the days preceding the accident, and that the airplane had not been refueled on the day of the accident. According to airplane recovery personnel, during the removal of the wings, approximately 1.5 cups of water was in the left wing and approximately 2 tablespoons of water was located in the right wing. Approximately 17 gallons of fuel was recovered from each wing. The airplane examination revealed that the O-ring seals located in the fuel caps showed evidence of deterioration, and the filler ports on each wing showed evidence of rusting (photos appended to file). The Safety Board conducted an engine examination with the assistance from the engine manufacturer, who was a party to the investigation. A liquid substance was removed from the fuel injection servo and tested for water utilizing a water finding paste. The test was positive for the presence of water (photo appended to file). Another sample obtained from a fuel line that feeds the engine driven fuel pump from the firewall also contained drops of water. The fuel line from the fuel injection servo to the fuel flow divider was removed; however, there was no evidence of fuel or water present. The fuel flow divider was opened and examined, with water droplets found on the fuel side of the diaphragm. The diaphragm showed no evidence of damage. A compression check of the engine was not conducted due to postimpact damage. No further discrepancies were noted with the engine.