As mentioned in another answer, you're doing a bit of damage control now, as price really should've been discussed beforehand.
If you start off by simply mentioning your price (or start the negotiation with any "reasonable" amount), you risk your boss thinking that you have unreasonable expectations, and possibly resenting you for feeling forced to pay that for the painting (even if he doesn't say anything about it).
If you let him lead with an amount, you of course risk being greatly under-compensated, which is perhaps not such a high cost considering the alternative. You could tell him that you're not really sure what to charge (which is true, but might be difficult to sell if he knows you have sold other paintings) and what he thinks it's worth or what he's willing to pay. If he gives a price that's actually higher than your usual price, you could just ask for $500 and tell him that's what you usually charge (probably not a good idea if you said you're not sure what to charge). If you choose to take the higher amount without saying anything, you risk him finding out you usually charge less later, which might not turn out well for you. You'd need a bit of negotiation skills and he needs a bit of knowledge of the price of paintings for this one to work, but switching to one of the other options is fairly easy in some cases.
Another option is to tell him it's a gift, but this (along with, to a lesser extent, leading with an amount he believes to be too little) may come across as an attempt at bribery.
If you could find some vaguely comparable favor to trade for it (you'll have to figure out what though) (yes, borrowing this idea from Mark) - that could significantly blur the lines of value and might end up with both of you totally happy.
You could also consider presenting him with a price range, which includes your target price (somewhere in the middle or upper part of the range). You could, for example, tell him that a painting of this size usually goes for about $250-$750. If he seems fine with it, you could probably proceed to tell him you usually charged $500. If he seems shocked by even those numbers, you could quickly add something like "... but you can have this one for $100" (although, if you're not careful, it could come across as if you're trying to give him a "bargain", in a bad way).
No clear winner (in my opinion), just comparing some alternatives.
For future cases (where you discuss the price beforehand), I'd personally just charge the usual rate, but feel free to give a bit of a discount if you wish, or even negotiate the price. It's much less important to get the price right before anyone's agreed to or done anything.