Steam – What happens if I decline a Steam gift

I agree with corroded that you should just give them the key, but to answer your question:

If you purchase a copy of a game you already own, you may or may not receive a giftable copy to give to someone else. According to Valve, the only cases where you get a giftable copy are:

1. Users who own Left 4 Dead and then go on to purchase "Left 4 Dead + Left 4 Dead 2 Bundle" will receive an extra copy of "Left 4 Dead"

2. Users who own Half-Life 2 and go on to purchase “The Orange Box” or the "Valve Complete Pack" will receive an extra copy of “Half-Life 2”.

3. Users who own Half-Life 2: Episode One and then go on to purchase the "Half-Life 2: Episode Pack”, “Valve Complete Pack” or “The Orange Box” will receive an extra copy of “Half-Life 2: Episode One”.

4. Users who own Dawn of War II and then go on to purchase "Dawn of War II Gold Edition" will receive an extra copy of "Dawn of War II"

5. Users who purchase the available four packs for specific Steam titles will receive three extra copies of that title to gift to friends.

6. Extra copies may apply as a part of some limited time promotions. In that case, information on what will be included with your purchase will be listed on the storefront's transaction page.

When trying to activating a Game you already own (or a bundle you already own parts of), Steam will warn you in a popup which game/parts won't be added to your library. You then have the choice to cancel the activation.

This is a two-part answer.

• Yes, you can gift items to people who live in other areas of the world, so long as the gift hasn't been redeemed yet. For example, I live in Europe, but I have received several gifts from friends in the US.

  See also Left For Dead 2 - Unlock Australian Censorship about how region restrictions carry over in gifts.

• If you gift the Orange Box to someone, there is only one key, which unlocks all 3 games in the Orange Box Collection. You cannot gift these games separately, unless your friend already owned a copy of Half Life 2, in which case he will receive an extra gift copy of Half Life 2, which he can then give to someone else. However, this is a rare case. If your friend has already registered the key with Steam, it cannot be used again.

Source: Steam's Support Site regarding Extra Copies