A solution is in this long winded reply: mulitple solutions actually,

I was having a very similar issue creating the linked server via the SSMS gui approach, (i.e. from the lower version db environment to the higher db version environment, by right clicking in SSMS on "linked Servers" and following that wizard)

My environment is a local workgroup with two PC's connected, Machine A is windows xp sp3 running Sql Server 2008 R2 developer edition and Machine B is Windows 8.1 running Sql Server 2014 Developer edition.

The linked server creation attempt from A to B would fail to connect. I "seemed" to try every option the gui provided for security. (but as it turns out, not every possible combination between the security page and the General page)

I then used the middle method for sp_addlinkedserver mentioned earlier in this thread.

EXEC master.dbo.sp_addlinkedserver @server = N'MachineB\MSSQLSERVER2014', @srvproduct=N'sql_server', @provider=N'SQLNCLI10', @datasrc=N'MachineB\MSSQLSERVER2014'

The linked server creation succeeded. The remote catalogs were now visible and I can query the remote db via the linked server name, (fully qualified reference)

The above presumes that all the little issues for configuring workgroup or domain connectivity via tcp/ip and programs and ports are set up correctly.

I do not know for sure, but I would imagine that the lower to higher type of setup has some little issues when done through the SSMS gui.

Looking at the properties of the successfully created Linked Server, I see that the result of using sp_addlinkedserver method was to set the security context as "Be made using the logins current security context" (3rd option in that list). In the general page of the linked server properties the type of connection was "Other data source" with the first three properties populated, (as per the sp_addlinkedserver command used)

Provider: Sql Server Native Client 10.0

Product Name: sql_server

Data Source: MachineB\MSSQLSERVER2014

(that MSSQLSERVER2014 is just the default instance name I did with the 2014 install, and with "MachineB\" it is just the full instance name.)

Using that as a template I then made a connection through the SSMS gui using those same options but a new linked server name and it worked fine.

So, it is not really a Gui bug, more like a user error (exactly like a user error). In anyone's defense though, the options that seem natural in the gui method do not work. Unless of course you are already very familiar with how to tweak the setup.

Please excuse the long winded explanation. But, I often find it hard to follow loose or very short explanations, and as a result try to be as specific as I can be, hoping you can infer the right approach for your particular environment.:-)