Have you checked the delivery logs to see if they tell you why? I don't believe there's anything by default that would reject that extension.

I was not able to replicate any issues receiving or sending from domains ending in the .XYZ top level domain. Delivery logs will be your best bet for clues as Derek pointed out, but you might also verify you're on our latest release as I believe the XYZ TLD is a relatively newer addition and support in older versions may be limited. 

I don't find any logs for these bounces in Delivery Logs... or I am clicking on wrong menu item.

I was reading on various internet forums that claim that emails from .xyz domains are not trusted.

I get bounce that states: Remote Server returned: '550 High probability of spam'

I got this bounce when sending email from my domain.xyz to one at gmail.com and another at aol.com 

I have all DNS records correctly setup for my .xyz domain.. so, I am curious if emails from .xyz domains are really not trusted. (If so, this is unfair... because some great domain names might be available in .xyz and not in .com)

We filter out .xyz -- we have yet in two years to get an email from a legitimate company with a legitimate website that isn't a scam in one way or another on that TLD.

There are several others we block and haven't lost a minute of sleep.

Allowing several of those extensions would add hundreds if not thousands of spams a day that require additional filtering, when in reality 99.999% of them are all junk or scams.

I appreciate all the answers. I understand, but not happy. These days, nobody can find a good name in well known TLDs such as .com, .net, .co... so it is injustice to non-spammers who purchase .xyz domains for legitimate use.

You're absolutely right Joe. Also more evidence for why email services being consolidated into a few big services isn't necessarily a great idea. What you could do to work around this is have another TLD that you use as your primary domain name for sending purposes and keep the .xyz domain as a domain alias of that domain in SmarterMail. That will give you less to manage and should allow you to avoid the blocks of those providers. That way you can keep the .xyz for branding purposes and it doesn't cost you on the deliverability side. 

The other piece of advice I would offer is that whichever TLD you go with; be sure to prime the IPs, deploy SPF/DKIM/DMARC/etc, confirm open relay is disabled, etc as most of these bigger providers are mandating these as requirements before they'll accept mail these days.