Preheat oven to 350°F. Line cupcake pan with paper liners or spray wells with non-stick cooking spray.
In the bowl of a stand mixer, fitted with the paddle attachment, or with a hand mixer in a large bowl, beat together the cake and pudding mix, sour cream, oil, eggs and 1/2 cup (4 ounces) coconut milk. Beat for about two minutes on medium speed until well combined. Fold in the shredded coconut.
Using a large cookie scoop, distribute the batter between 24 muffin wells; about 3 tablespoons of batter per well.
Bake in preheated oven for 18-22 minutes or until the tops of the cakes spring back when lightly touched and a toothpick inserted into the center comes out clean. Allow cupcakes to cool inside muffin tins for about 10 minutes.
Remove cupcakes from muffin tins and allow to fully cool on a wire rack. Prepare the frosting.
For the Frosting
While the cupcakes bake, place the remaining coconut milk into a medium saucepan with high sides. Over medium heat, bring the coconut milk to a boil, stirring occasionally. Turn the heat down to medium-low heat and reduce the coconut milk for about 20 minutes. Turn the burner off and allow the coconut milk to cool completely. Cover and chill (about an hour); this will cause the coconut milk to thicken up a bit.
In the bowl of a stand mixer fitted with the paddle attachment, beat the butter and the reduced and cooled coconut milk on medium-high speed for about 5 minutes. Add in the lime zest, vanilla, and coconut extract and mix to combine.
Turn the mixer down to low speed and gradually add in the confectioners’ sugar until it is completely incorporated. Turn off the mixer and check the buttercream for taste and texture. Turn the mixer back up to medium-high speed and beat the mixture for about 3-4 minutes or until light and fluffy.
Pipe the frosting onto the cooled cupcakes and if desired, garnish with a dusting of shredded coconut or additional lime zest.
Notes
If you ran out of powdered sugar for the frosting, learn how to make powdered sugar for a simple-to-use substitute.