Step 1: Preheat oven to 350 degrees F.
Step 2: Butter and flour a 8-inch square baking pan.
Step 3: Using an electric mixer cream butter and 1 1/2 cups powdered sugar. Beat in eggs one at a time. Beat in milk and then beat in the flour.
Step 4: Transfer batter to prepared pan.
Step 5: Bake for 30-40 minutes or until cake tester inserted in center comes out clean.
Step 6: Meanwhile, grate enough lime peel to equal 1 tablespoon.
Step 7: Halve the limes and squeeze enough juice to measure 1/4 cup.
Step 8: Mix the peel, juice and 1/4 cup sugar in a small bowl. Set aside.
Step 9: Using a skewer poke holes all over the baked cake. Spoon half of the lime mixture all over the baked cake. Cool.
Step 10: Whisk 1 cup powdered sugar into the remaining lime mixture; drizzle over the cake.
Step 11: Let stand one hour before serving and then cut cake into squares.
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