In the bowl of a stand mixer fitted with a paddle attachment, beat the butter and sugar together until sandy. Add the egg yolks and mix until light and thick. Add the dry ingredients to the mixing bowl in 3 additions, alternating with the sour cream, ending with the flour.
Mix for 30 seconds on low speed or until the dough is smooth but slightly sticky. You want to mix enough that the dough doesn't fall apart in the oil, but not so much that it becomes tough. If the dough is unbearably sticky, add extra flour one tablespoon at a time (especially if you live in a warm & humid climate).
Cover with plastic wrap and chill for 1 hour, or until firm.
On a floured surface, roll out the dough to about 1/2 inch thickness. Use a doughnut cutter or two differently sized biscuit cutters to cut out as many donuts as possible, dipping the cutters into flour as necessary to prevent sticking. You should get about 12 doughnuts and holes. If the dough gets too loose, sticky, or greasy at any point return to the fridge to firm before continuing. Refrigerate while you heat the oil so the dough is slightly cold when it fries.
Pour 2 inches of canola oil into a heavy bottomed pot with a deep-fry thermometer attached. Heat to 325°F. Fry the doughnuts a few at a time, being careful not to overcrowd the pot. Fry on each side about 2 minutes, being careful not to let them burn. Keep an eye on the thermometer and adjust your stove heat to maintain the correct oil temperature. Let drain on a paper bag to soak up the excess grease.
Some readers have complained that 1/2 teaspoon nutmeg was too much. Nutmeg is a crucial flavor component to any doughnut, but if you don't like the taste reduce it to 1/4 teaspoon or omit it altogether.
From Hand Forged Doughnuts via Completely Delicious