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It is illegal to distribute any copyrighted material without the express written permission of the copyright holder(s). Sometimes, especially in the case of electronic or dance music, permission may be implied--but not always. Check the original CD or record for the fine print. You have to keep in mind that a lot of times the artist is not actually the copyright holder; so he or she may be totally cool with you using their stuff on your mixCD; but the publisher may not be happy with it at all. It's an unnecessarily complex waste of paperwork, but that's the way it is.
Even if it's a "demo" of your skills as a DJ it is still illegal unless otherwise stated by the original copyright holder.
Still, you're pretty much small potatoes in the grand scheme of things and since you're handing them out for free it's not like they'd do much but send a stern cease-and-desist. You can't get blood from a turnip.
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