How to store engine?

The last one I tore down for a build was supposedly stored inside. When I pulled the heads cylinders 1 and 2 both had water in them and were starting to rust. Unless you heard this engine run I wouldn't take anyone's word on it being inside. I would personally pull the heads to make sure there is nothing in there. I would coat cylinder walls with something to protect them. When I drained the oil on mine I got quite a bit of water before actual oil came out. After that I'd reinstall the heads with old gaskets just to seal it up.