In "The £1,000,000 Bank-Note," why did Mark Twain most likely create the character Henry Adams as an American living in England?

This particular answer is open to different interpretations from reader to reader. I think one main reason is that setting the story in England makes realistic and logistic sense to Twain and his readers. The United States and England at that point in history had fairly amicable relations. The American people are familiar with England as a country that the United States does business with. Adams could have been picked up by any ship and been taken to any country, but having him go to England allows readers to visualize Twain's fiction in a realistic way. Readers know that a rich Englishman is realistic, but England is just foreign enough that it would make sense that two rich English guys would make such a ridiculous bet. By placing the story in England, Twain is able to seamlessly blend realism with fantasy. Additionally, by putting Adams in a foreign country, Adams essentially has no choice other than to go along with the plan. He does not know anybody there, and he cannot be rescued by fellow Americans.