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In a large bowl, combine sugar and butter. Beat until mixture is creamy, about 2 minutes.
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Add 1/3 cup eggnog, egg and vanilla; continue beating until well combined. Reduce the speed to low; add flour, baking powder, nutmeg and salt. Beat until dough is well mixed.
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Divide the dough in half and wrap each in plastic wrap. Refrigerate until it is firm, at least one hour.
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Preheat oven to 375°F Roll out dough, one half at a time on a lightly floured work surface to a ¼-inch thickness. Cut out the cookies with a Santa shape or your favorite holiday cutter. Place the cookies 2 inches apart on ungreased baking sheets.
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Bake the Santa cookies for 8 to 10 minutes or until the edges are lightly browned. Remove from the oven and cool completely.
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Frost with your favorite icing or decorate with sprinkles and candies.