So my question is whether it is okay to re-gift and are there certain rules you should live by?

Well after asking some fans and friends here are some rules for re-gifting for the Holidays:

This is a no brainer No. 1 rule - Never, EVER give the gift to the person who gave it to you. Read this part aloud: THIS WOULD BE REALLY BAD! You will hurt feelings and you will end any Christmas cheer in the room. Also make sure you're not re-gifting in the same social circle you won't want to give one co-worker a gift that another gave you.

Make sure the gift is something the recipient either wants or can use. You want the re-gifting cycle to stop, not to keep continuing.

Don't re-gift an opened packaged item, even if you didn't mean to do it or a used item. At this point it's become a yard sale item.

Rewrap the gift. Do not attempt to tape it back up in the original wrapping paper this is tacky and distasteful. Just because your re-gifting doesn't mean you don't care. If necessary place it in a fresh box and wrap it with new paper. The more thought you put into the presentation the less likely the recipient will detect that this is a re-gift.

Take your unwanted/not needed gift to a Yankee Swap. This is a perfect place for such an item where it's encouraged to keep costs down. Toss your gift into the ring and increasing its chances of finding a new happy home.

Examine all gifts before re-gifting make sure there are no old tags, cards or engravings. How embarrassing would it be if your recipient opened up a gift that had a tag that said from Aunt Sally? Yikes!

Re-gifting has become more popular and acceptable. A recent survey by CreditDonkey.com found that 83 percent of adult approved of re-gifting. About half of the 1,125 adult Americans polled in the survey said they suspected they had received a re-gift in the past.

If you have doubts than consider the alternatives such as returning it, some stores will take back an item if they carry it and give you a store credit. Another alternative would be to sell it on Craigslist or eBay, especially if you opened it by mistake most people on Craigslist or eBay don't care as long as it's in good working order. You could also donate it most charities will take just about anything, even that ugly sweater.