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Custom Domain email not working: “User unknown in relay recipient table”

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Archived post from July 31, 2013. Product: Hotmail – no longer developed by its maker. Details may be out of date.

Question asked on Jul 31, 2013
I'm setting up custom domain using login.live.com services...
I've already created the mx record and the txt (server trust: "v=spf1 include:hotmail.com ~all").
It's "Active" according to the admin panel.
I've also created an email account, let's call it "*** Email address is removed for privacy ***"

When I send a test message to this email account *** Email address is removed for privacy *** I've created, it bounces with the following error:

"Delivery to the following recipient failed permanently:

     *** Email address is removed for privacy ***

Technical details of permanent failure:
Google tried to deliver your message, but it was rejected by the server for the recipient domain mydomain.com by mx-vip-01.uni5.net. [177.185.207.35].

The error that the other server returned was:
550 5.1.1 <*** Email address is removed for privacy ***>: Recipient address rejected: User unknown in relay recipient table"

How can I fix this?

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