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Both the Uniform Mechanical Code and International Mechanical Code prohibit a non direct vent fuel burning furnace and W/H in a bathroom, toilet room, or room for sleeping unless non DV appliance is in a separate closet with gasketed self closing doors and the closet must have the proper ventilation.
The main issue is that bathrooms have exhaust fans which can easily back draft a gravity flue. Even a dryer exhaust can back draft the furnace or W/H.
I've seen it lots in basements around Wyoming and Colorado and homes originally built near the 1970's. Kinda a"cram one in where you can" type situation just so the house could be listed with 1 more bathroom than it really had.
More likely the central heat was a retrofit. My dad installed a furnace in the home they bought when I was a teenager. Before that it was a fireplace and area heaters.