Linked Server with Windows Authentication Permissions
The "Be made using this security context" doesnt support Windows Authentication. 


  Be made using this security context Specify that a connection will be
  made using the login and password specified in the Remote login and
  With password boxes for logins not defined in the list. The remote
  login must be a SQL Server Authentication login on the remote server.


You need to use this: 


  When connecting to the local server using Windows Authentication
  (recommended), select Be made using the login's current security
  context to connect to the remote server using the same Windows
  Authentication credentials.


Or you could use "Not be made" and specify the login with impersonate. Requires that the user exists on both servers aswell. 

You can read more here: https://technet.microsoft.com/en-us/library/ms188477(v=sql.105).aspx