On January 4, 2005, about 0950 Pacific standard time, a Cessna 152, N49391, lost engine power and nosed over on landing near Rancho Murieta, California. Sky Walk, Inc., was operating the airplane under the provisions of 14 CFR Part 91. The certified flight instructor (CFI) and the pilot undergoing instruction (PUI) were not injured; the airplane sustained substantial damage. The instructional flight departed Sacramento, California, about 0915, with a planned destination of Rancho Murieta. Visual meteorological conditions prevailed, and no flight plan had been filed. In a written statement to the National Transportation Safety Board the CFI stated they were completing a flight review for the PUI at the time of the accident. Both pilots taxied to the fuel pumps to top off the airplane's fuel tanks. After they fueled the CFI sumped the tanks and found water in the right wing. The PUI told her during the preflight he found water in the sump also. She sumped the tanks 3-4 times until there was no water. Both pilots were confident there was no more water in the fuel tanks and they proceeded with the flight. After a simulated engine failure the PUI applied full throttle to go around. On climb out, about 400 feet mean sea level (msl), the airplane lost power and the CFI took the controls to make an emergency landing. She chose a soft muddy field next to the runway to perform a soft field landing; however, the nose gear dug into the ground and the airplane nosed over. The CFI and PUI exited the airplane and later returned to secure it after they saw no danger of the airplane catching fire. With the assistance of a representative from the engine manufacturer a post accident engine examination was conducted. He found water in the gascolator and carburetor. He added fuel to the wing to fuselage fuel line and ran the engine. There were no anomalies noted. The engine was stopped and started again with no anomalies noted.