In a large bowl beat butter or margarine until softened. Add 1 cup sugar and beat until fluffy. Add the egg and vanilla and beat well.
Stir together the flour, baking soda, salt, and nutmeg. Add flour mixture and sour cream alternately to butter mixture. Beat until well mixed.
Cover and chill at least 2 hours or until easy to handle.
Preheat oven to 350 degrees F.
Combine cinnamon and 2 tablespoons of sugar in a small bowl. Roll dough 1/8 inch thick. Cut into rings with a 2 1/2-inch doughnut cutter.
Twist the rings once to form figure eights and place 2 inches apart on an ungreased cookie sheet. Spinkle with cinnamon-sugar mixture. Bake for 6-8 minutes or until done. Remove and cool on a wire rack.