The private pilot/owner of the amphibious airplane was receiving instruction to obtain his seaplane rating. After the pilot receiving instruction took off from a runway, the flight instructor took control of the airplane to demonstrate a water landing. While maneuvering for the water landing, the flight instructor reported he was distracted by static over the intercom system and failed to reconfigure the landing gear to the retracted position for a landing on water. Upon touching down on the water, the airplane nosed over resulting in substantial damage to the fuselage. The airplane quickly became submerged in water and the pilots removed their restraints, opened the canopy, and swam away from the wreckage. The pilot reported that there were no preimpact mechanical malfunctions or failures with the airplane that would have precluded normal operation.