I always just smile and say thank you anyways, because I don't want to hurt anyone's feelings. I know I'm difficult to buy gifts for - in my family, people don't generally do surprise gifts. You get asked point-blank at Thanksgiving, "What do you want for Christmas?" and that's what you end up getting, except I can never really think of anything that it wouldn't just be easier to get myself. In recent years I've been telling people to just *not* give me gifts but they don't always listen. So even if I don't like it I smile, say thank you, and try to find a practical use for whatever-it-is, because I know they probably had a trying time picking it out, and they're doing it 'cause they care.
That's why when I get gifts for people I try to stick to something pretty generic and usually consumable (like, a box of fancy candy, for someone who likes sweets) unless someone's said exactly what they're hoping to get.
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