Grow a pair and tell the couple that the sentiment of the gift is welcome but the actual gift is the most hideous painting you have ever clapped your eyes on and can they please take it back as it will not be appreciated in your house.
If they are as good friends as you say it will be no harm done
Thought long and hard about this and your only option is to call time on the friendship, make sure the house insurance is in order and torch the place, or maybe less drastic to have it 'stolen' from your car if you can come up with a pretext for it being in the car. Good luck
Life's too short to pratt about! Just tell them that you appreciate the effort that went into it and you totally appreciate their artistic ability, but unfortunately it's not your taste and then ask them what they would like you to do with it? If they are good friends, then they will take it in the vein, that it's meant! If not F@ck em!
Should perhaps have mentioned - there are mental health issues involved here too, potentially - no matter how gentle and diplomatic we may be about declining / returning the painting, there is a good chance he'll take it badly. There again, if it doesn't appear on a wall soon, he may do so regardless