Same meaning as "Nigger in the woodpile" just more "politically correct." It means there is black ancestry (or Native American) in a white person's "bloodline."
Suzie had a great, great, great uncle who was a black man. He is said to be the "Nigger in the Woodpile".
With all this political correctness, you can't say there's a nigger in the woodpile anymore, you have to say there's an African American in the Lumberyard.
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