Make the cupcakes: Preheat the oven to 350 degrees F and line a 12-cup muffin pan with paper liners. Whisk the flour, baking powder, salt, baking soda and nutmeg in a medium bowl.
Beat the butter and granulated sugar in a large bowl with a mixer on medium speed until creamy, about 2 minutes. Add the egg and vanilla and beat until fluffy, about 3 more minutes. Reduce the speed to low; add the flour mixture and beat until just incorporated, about 1 minute. Add the sour cream and beat until light and fluffy, about 2 more minutes.
Divide the batter among the muffin cups. Bake until a toothpick inserted into the center comes out clean, about22 minutes. Let sit until cool enough to handle, then gently press the back of a small spoon into the center of each cupcake to make an indentation. Fill each indentation with a few teaspoons of cranberry sauce. Remove the cupcakes to a rack to cool completely.
Meanwhile, make the frosting: Beat the butter and 1 cup confectioners' sugar in a large bowl with a mixer on medium speed until combined, about 2 minutes. Reduce the mixer speed to medium low; gradually add the remaining 2 cups confectioners' sugar and beat until fluffy, about 2 minutes. Increase the speed to medium high; beat in the cranberry sauce, vanilla and salt until combined. Spread the frosting on the cupcakes and top with dried cranberries.
Photograph by Charles Masters
Recipe courtesy of Food Network Magazine