Deficiency Judgments & Debt Relief Tax Liability

If a seller of a vacant (and run down) property get's debt forgiveness in a short sale, are they liable tax wise (to the IRS) for the forgiven debt if the house was a rental at the time of purchase?

How about it was a primary residence but isn't any longer?

Are you seeing banks going after sellers/borrowers for deficiency judgments? In NJ they're allowed.