Oh, I love a mystery.

"they decided to not put it on a schedule C and to have a partnership return."

They likely got that guidance, perhaps from an insurance agent, or look at their loan docs.

"There is a piece of real property that is being depreciated on the return."

Not everyone gets the right legal and tax guidance.

"When I looked it up on our local assessor's website, it is listed as being owned by husband and wife instead of the business."

That's not unusual. It really doesn't give them more protection, anyway, since it is still the two of them.

Did they open a separate bank account and do they keep the money segregated or do they commingle, there? Is the property business or residential, and is it insured by its own policy, a business policy, their personal property policy? Is it their shop or warehouse for the business? Are they trying to also charge Rent to themselves?

That was good to check, but otherwise, if there isn't anything else fishy, it seems to pass the smell test.