If a person collects a lump sum on their 401k after leaving a job and gives it as a gift to their spouse are they still required to pay taxes on it?

Absolutely. Taxes AND Penalty for early withdrawal. (Only transfers to another qualified account avoid tax and penalty....this is normally explained to you many times by those administering it). You never paid taxes on the money going in or as it (presumably) grew...you must as it comes out. What you do with it, give it to a spouse, a casino or a toilet makes no difference.