Grease and flour an 8 1/4-inch tube cake pan. Cream butter with 1 cup sugar. Beat egg yolks until light, beating in remaining cup of sugar until light and lemon-colored. Fold in lemon juice and combine with creamed mixture.
Sift flour with baking powder and salt, and then stir into creamed mixture alternately with milk. Stir in nuts and flavoring. Beat egg whites until light, but not dry. Fold in lightly. Pour into cake pan; bake at 350° for about one hour.
To make icing, make a syrup of sugar and water and cook until the soft-ball stage (238°). Allow to cool. Beat egg whites and pour syrup into them in a thin, steady stream, beating the mixture until it is thick enough to spread over top and sides of cake. Add flavoring before spreading. Sprinkle top and sides of cake with nuts.