If your client is a US citizen or Resident Alien, that Canadian interest income is taxable on his 1040.

No exclusion. The foreign earned income exclusion is for earned income only. Interest is not earned income.

He can claim a Foreign Tax Credit for tax paid to Canada on this income using Form 1116. The Canadian tax could be deducted as an itemized deduction on Sch A instead, but the credit will probably give a better result.

There is a separate foreign tax credit computation for Alternative Minimum Tax.