At 13:00 Pacific time, a Piper PA-38-112 lost power while conducting a go-around after a simulated engine-out procedure at the Selma Airport. The airplane crashed in a vineyard, but the student and flight instructor were not injured. The instructor told investigators company procedure called for switching to the fullest tank prior to takeoff after a touch-and-go. On the touch-and-go takeoff, the fuel tank was switched and the engine quit at 200 feet agl. The CFI took control and made an unsuccessful attempt to restart the engine. Inspectors found the fuel valve to be in between the left and right port openings, and the fuel valve control rod did not turn. The plastic fuel selector handle was cracked completely through. The inspector stated that the pilots would not have been able to tell that the fuel valve was in an intermediate position in correlation to the fuel selector handle position.