System Information
Linux bubastis 3.10.25-gentoo #10 SMP Thu Jan 30 22:17:35 UTC 2014 x86_64 Intel(R) Core(TM) i7-4800MQ CPU @ 2.70GHz GenuineIntel GNU/Linux
01:00.0 VGA compatible controller: NVIDIA Corporation GK107GLM [Quadro K1100M] (rev a1) (prog-if 00 [VGA controller])

Blender Version
Broken: git bc9e66f0830627e807f720dca4b9d5d8d39e732a

Short description of error

When you click the button beside a linked object's name to make a local copy of that object; a subsequent undo operation does not restore the linked object, but makes the object disappear.

use the Link menu option to link an object from an external file.
Click the "make local" button beside the object's name in the object panel.
press ^Z to undo.

The object disappears. I believe the linked version should be restored instead.