Preheat oven to 325 degrees F.
In the bowl of an electric mixer fitted with the paddle attachment, cream the butter and sugar on high speed until light and fluffy, about 5 minutes. With the mixer on low speed, add the eggs, 1 at a time, scraping down the bowl after each addition. Add the vanilla extract, key lime zest and juice and mix well. In a separate bowl, sift together the flour, baking powder, baking soda, and salt. In 5 parts total, alternately add the dry ingredients and the buttermilk to the batter, beginning and ending with the dry. Mix until just combined. Fold the coconut into the cupcake batter.
Line a muffin pan with paper liners and fill each liner almost to the top with batter. A spring loaded 1/4 cup ice cream scoop works great for this and ensures the cupcakes are all the same size. Bake for 25 minutes or until the tops begin to brown and a toothpick comes out clean. Remove cupcakes from oven and allow to cool in the pan for 10 minutes and then transfer cupcakes to a baking rack to cool completely.
While the cupcakes are cooling you can make the frosting. In a small heat proof bowl set over a pot of simmering water, carefully and slowly melt the white chocolate. Remove from heat and let cool until just slightly warm. Meanwhile, in the bowl of an electric mixer fitted with the paddle attachment, beat the butter until light and fluffy. With the mixer on low, gradually add the powdered sugar until well combined. Add the salt, vanilla extract, key lime juice, and sour cream and mix until very smooth. Add the melted white chocolate and mix just until incorporated.
Frost the cupcakes and garnish with a bit of grated key lime zest. Enjoy!
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