This error occurs because the owner of the account of one of the contacts being merged is inactive, or the account of one of the donations associated with the contacts is inactive.  To fix this, do the following:
  1. Look at the Account record for each Contact involved in the merge.
  2. Check the Account Owner on the Account record and see if they are Inactive (it will usually list this if you hover over the name, otherwise click the name to bring up the Owner's record).
  3. Also check the donations of both contacts to make sure the Donation Owner is active.
  4. If the Account Owner or Donation Owner is inactive, change it to an administrator that is active.
  5. Once this has been verified for each contact, merge the records again.