Make the candied zest: Remove the grapefruit zest with a vegetable peeler and slice into thin strands. Place in a saucepan; cover with water and bring to a simmer. Drain the zest and return to the saucepan; cover with water and repeat 2 more times. Set the zest aside. Juice the grapefruit into the saucepan, reserving 1 tablespoon for the frosting. Add the liqueur and granulated sugar; bring to a simmer over medium-high heat, stirring to dissolve the sugar. Add the zest, reduce the heat to low and simmer 20 minutes. Remove with a slotted spoon; set aside. Reserve the syrup.
Make the cupcakes: Preheat the oven to 350 degrees F and line a muffin pan with 12 cupcake liners. Whisk the flour, baking powder and salt in a medium bowl. Beat the butter and granulated sugar in a large bowl with a mixer on medium-high speed until light and fluffy, about 5 minutes. Beat in the eggs, one at a time, then beat in the vanilla and the grated grapefruit zest. Reduce the speed to medium and add the flour mixture in 3 additions, alternating with the milk, beginning and ending with the flour mixture; beat until the batter just comes together.
Divide the batter among the muffin cups, filling each two-thirds of the way. Bake until a toothpick inserted into the centers comes out clean, 18 minutes. Poke a few holes in each cupcake with a toothpick. Reheat the grapefruit syrup; brush generously over the cupcakes (reserve the remaining syrup). Remove the cupcakes to a rack to cool completely.
Make the frosting: Beat the butter in a large bowl with a mixer on medium-high speed until fluffy, about 2 minutes. Add the confectioners' sugar, food coloring, grated grapefruit zest, liqueur and the reserved 1 tablespoon grapefruit juice; beat until smooth, about 3 minutes.
Spread the frosting on the cupcakes. Dip grapefruit segments in the remaining syrup and set on the cupcakes; top with the candied zest.
Courtesy of Food Network Magazine