Hope these repro steps are good enough. There are no real error messages.
1. Set workspace mapping of root team project. Source Control Folder: $/TeamProject Local Folder: D:\Workspace\TeamProject
2. Create new folder and Check-in SCC folder $/TeamProject/Main
3. Select folder $/TeamProject/Main and Branch from Version by "Latest Version". Target Branch Name: $/TeamProject/Dev
4. Check-in new $/TeamProject/Dev branch into SCC
5. View the branch hierarchy to ensure Main is the parent of Dev
6. Create new folder and Check-in SCC folder $/TeamProject/Dev/NewFolder
7. Add and check-in a new file into $/TeamProject/Dev/NewFolder (Optional Step)
a. The Merge Problem of a new folder in a child branch
i. Right Click and Merge $/TeamProject/Dev/NewFolder
In Source Control Wizard the Source branch is $/TeamProject/Dev/NewFolder AND the target branch dropdown is empty. Despite the $/TeamProject/Dev branch is a child of $/TeamProject/Main the target branch dropdown is empty.
ii. Right Click and Merge $/TeamProject/Dev
In Source Control Wizard the Source branch is $/TeamProject/Dev AND the target branch dropdown has $/TeamProject/Main
8. To get around merge problem merge by one of two following methods and Check-in:
a. Label $/TeamProject/Dev/NewFolder including the root ($/TeamProject/Dev) in the label
b. Changeset including the root and undo any other miscellaneous pending changes. Only the $/TeamProject/Main/NewFolder should be in the pending changes list
9. After checkin right click on $/TeamProject/Main/NewFolder and select Properties. Select Branches tab. The $/TeamProject/Main/NewFolder is a child of the DEV branch.