What license should be chosen on arXiv for a paper to be published in Communications in Algebra at Taylor&Francis?
According to the publisher's rules, you can share your preprint "as much as you like". According to SHERPA/RoMEO, you can also share the post-refereed version. What you cannot share is the publisher's version, the one that will appear on the website (don't ask me why).

So the simplest and safest is probably the first option, grant arXiv a license to distribute your article. You can find more info here. Roughly speaking, with the CC licenses, you allow other people to take your article, redistribute it themselves, modify it and redistribute the modified version etc., possibly with some limitations (SA: they must use the same license when redistributing; NC: commercial use is prohibited). It appears possible that the CC licenses conflict with copyright transfers.

I've never tried, but if you check the last option ("none of the above licenses apply") then arXiv will probably refuse your preprint. The "public domain" option is also probably not possible for you, because that would mean you waive all your copyright-related rights, including transferring the copyright to the publisher – which they will probably require.