Tax help- 3rd country investments, US/Canadian dual citizen

Does anybody know how income on investments in a third country (and associated tax credits) would be handled if you are a dual US/Canadian citizen living in Canada?

Obviously you file in the third country first, but it gets confusing with tax credits/exclusions in Canada and the US -- seems like you get into a situation where you are either double-taxed in the US and Canada on the third country income, or you get into a kind of chicken or the egg dilemma when attempting to calculate the US and Canada foreign tax credits.

Basically it boils down to where your tax home is, effectively if you live in Canada and pay tax in Canada then you would do it the same way any other Canadian resident does it.

The wrinkle is that US citizens must file a 1040 return every year and if your tax home is outside the US, a 2555 or 2555-EZ as well.

If your income is over the foreign exclusion limit ($87,600) plus the other deductions you're entitled to in the US, then you're subject to dual taxation on the amount over the limit, there is no credit you can claim for it.