Mr. Pauper and Mrs. Queen are the equal shareholders in Corporation PQ. Both shareholders have a 37 percent marginal tax rate. PQ’s financial records show the following.

Gross income from sales of goods ................................ $980,000
Operating expenses ........................................................  (410,000)
Interest paid on debt to Mr. P and Mrs. Q ...................    (62,000)
Dividend distributions:

Mr. Pauper ....................................................................   (50,000)
Mrs. Queen ...................................................................   (50,000)

a. Compute the combined tax cost for PQ, Mr. Pauper, and Mrs. Queen.

b. How would your computation change if the interest on the shareholder debt was $162,000 and PQ paid no dividends?