The tax code assumes all income is taxable unless you prove otherwise. You are required to have adequate business records to support your income, expenses and deductions. There was a recent tax court case in which a person made over $20,000 on eBay and claimed they were all used items. The court noted that the taxpayer had no proof that the items were used, and assessed taxes and penalties on the full amount as business profit. (The person was an IRS employee, ironically.)
You should have some kind of record documenting each item you sold, that includes a description, and when you bought it or received it as a gift, and how much you paid. This is your inventory, and if you are audited you will need to show the auditor that all the items you sold were at a "loss" (less than you paid) and so not taxable. Since you probably don't have receipts, make the best list you can from your recollections and other financial records. Also keep track of your listing fees and other expenses.
I'm concerned about listing this as a schedule C business; if you list it as an at-risk business, then I believe the program will let you deduct your losses against your other income. But this would probably be viewed as improper because, under the circumstances, I think the IRS is likely to look at this as a hobby rather than as an "ongoing trade or business", since you aren't actually trying to earn a profit. You want to list expenses equal to income, not more than income.
