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Preheat oven to 350 degrees.
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Cream together butter and sugar.
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Add the sour cream, egg and the vanilla; mix well.
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Stir in baking powder, baking soda, salt and nutmeg.
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Gradually add flour until dough is too difficult to stir. Mix the rest by hand.
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Turn the dough out onto a floured surface and roll out to 1/4 to 1/2-inch thick. Use your favorite cookie cutters.
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Space cookies about 1 1/2 inches apart on a greased cookie sheet.
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Bake for 6-8 minutes or until lightly browned at the edges.
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Cool completely on wire racks.
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Decorate with icing, colored sugar (if using colored sugar, sprinkle cookies before baking) or dip tops in melted chocolate.