Assuming you have legal title to these goods;
1. Whenever you sell property, you have a capital transaction, a capital gain or loss. You have a capital gain if the selling price is more than your cost basis. This is reported on schedule D. It is a long term capital gain if the holding period is more than a year and taxed at a lower rate, and a short term capital gain taxed as regular income if held less than one year.
2. With respect to a gift, your cost basis is the cost basis of the person who gave it to you, and your holding period is the same as their holding period.
3. If we assume there was legal transfer of title from the company to the friend and from the friend to you, then your friend's cost basis is whatever the company's cost basis was. If your friend paid for the equipment, that is his cost basis, but his cost basis is not increased by the storage fees he paid.
4. The company's cost basis is probably zero, because they would have depreciated the equipment as part of the normal business use of the equipment.
5. Therefore, 100% of your proceeds will be taxable income. You don't need to report it as a schedule C business for buying and selling equipment, you can report the sales as capital transactions on schedule D. Report your cost as zero, the holding period as more or less than one year (depending on how long you and your friend together have owned this storage unit), that you acquired the property as a gift. You can reduce the selling price you report by any fees related to the sale (like an auction commission, or credit card transaction fees) but you can't deduct any other expenses (like the rental of the storage unit, or shipping costs if you pay to ship items to the buyer.)
6. Even if you would like to think that the equipment was not 100% depreciated, the tax code assumes that all income is taxable unless you prove otherwise. So if you are audited, the IRS will assume the cost basis of the equipment is zero unless you can get hold of the supplier's financial records.
7. You might be able to report your sales of this equipment as a schedule C business if you are involved in an "ongoing trade or business" where you intend to make a profit, you advertise, and do other businesslike things that businesses do. If you report this on schedule C, you can deduct all your expenses, including rental on the storage facility, eBay listing fees, shipping, and so on. The sales proceeds will still be taxed as capital gains items, but you will also pay 15% self-employment tax on your net profit. Which way is better is something you would have to test. Having self-employment income will go to your social security account for retirement credits, and may give you eligibility to make IRA contributions and do a few other things.
8. However, since you are not going to make a business out of buying and selling storage units generally, you just want to dispose of this one, the schedule C route could be seen as improper by the IRS, as it is not really your "ongoing trade or business" and is more like a one-off source of income or hobby, that would only be reported as capital gains on schedule D.
