This article is from the Anime Music FAQ, by Ru Igarashi with numerous contributions by others.
Not true. There have been quite a few cases in the US where a finding of violation was made even if no profit was made, or no money exchanged. As long as some party benefits to the exclusion of the rights holder, there is a good chance of a finding of violation. That means even trading CDR or MP3 of songs is most probably illegal if the original CD does not accompany them.
 
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