According to the pilot, the airplane was not operated for an extended period of time due to a propeller strike. The owner of the airplane received a ferry permit to have the airplane flown to another airport for repairs. Before the flight, the pilot completed a preflight inspection and engine run-up, during which time he did not notice any anomalies. During the initial climb, about 300 feet above ground level, the engine lost power and the pilot attempted to return to the airport. The airplane impacted the ground on the east side of the runway resulting in substantial damage to the fuselage. A postaccident examination of the airplane by a Federal Aviation Administration inspector revealed that the fuel was contaminated with water. The right and left tanks were drained and about 1 pint of water was captured from each fuel tank. In a telephone interview with the pilot, he recalled that during the preflight inspection, he did sump the fuel tanks, but did not notice any water in them.