Mix sugar and yeast, add warm water. Allow to stand until it begins to bubble.
Microwave potato until it is tender. I cut the potato in two and put the cut faces down in a potato ricer and mash the hot potato into the milk.
Beat the egg and add the milk, egg butter and salt to the yeast mixture. Add enough flour to form a batter/sponge.
Allow the sponge to raise to at least 1/2 hour.
Add additional flour and knead until the dough is moist but doesn't stick to your hands. Continue to knead for 10 minutes adding small amount of flour as necessary.
Cover the dough and refrigerate overnight.
Punch down the dough, divide in half and roll out the first half to a thickness of about 1/2 inch. Cut circles with a doughnut cutters. Cover and set aside. Repeat for the second half.
In an electric skillet or deep fryer, heat oil to 350 degree F.
Starting with the first doughnut cut, fry 2 or 3 doughnuts at a time, turning them over when they have browned on one side.
Toss in granulated sugar, cinnamon sugar or powdered sugar.