An SBR is only an SBR when it's an SBR, as Girodin said.
If it has a 16" upper, it's not an SBR.
Once a lower receiver has been registered as an SBR, you can legally put a short barrel upper on it. Then it's an SBR. You can also put a 16" upper on it, and then it's not. Then you can put the short barrel upper back on it and it's an SBR again.
If you want to sell it as an SBR, then new buyer has the pay for a tax stamp. If you want to sell it as a Title I/regular rifle, then you can put an 16" upper on it and just sell it as one. The ATF prefers that you tell them so they can remove it from the registry, and it's a good idea, but it's not required. The new owner can only configure it as an SBR if he paid for the stamp when it was transferred, or registered it again later.
With all of that said, the label "SBR" means nothing. It's not required to be written on SBRs. The real question is whether the lower receiver is engraved with the maker's name, city and state. If so, it may have once been an SBR. But based on your description, it isn't one now.
Your buddy has no problems.
Aaron