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Most organizations have rules or guidelines about accepting gifts, period. As an example, I worked for an office where a gift that is below $5 in value can be given or accepted without violating that employer’s ethics guidelines. So if you need an ‘out’ for not accepting his or her gift, you can mention whatever workplace rules there may be about gift-giving.
If the boss is giving the whole team a gift and the gifts are all relatively equal in value & don’t violate your workplace rules about gifting, it may be easier to accept the gift graciously, give the boss the ego-boosting thanks and praise, and then if you don’t like it or don’t want it, regift or take home and throw away.
If the boss won’t take ‘no’ for an answer or gets nasty about the gift in any way, document the incident carefully and seek a meeting with HR. You are right to be cautious; the narcissist’s behavior is generally a slippery slope, where your boundaries will be tested often to see if they will stretch or break.
The more nonsense you tolerate, the more nonsense the narcissist will try and throw at you until it becomes ridiculous and unbearable, but at that point you may have allowed unethical things to happen for such a period of time that you may have endangered your career and professional reputation. So it’s best to nip these things in the bud, keep things polite and professional, do not participate in gift exchanges if they make you uncomfortable, document any retaliation or other negative behavior from your boss and look for a new job ASAP because eventually working for or with a narcissist is toxic.
Editing to add: Posts tagged 'quora' were originally my answers to peoples' questions on quora.com. They were monetized but I am giving them away for free here.
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And if you prefer to pay it forward, I recommend Safe Place as an excellent place to support.
