Most definitely. Honesty is definitely the best policy in every situation, good or bad. Trying to spare a loved one's feelings should not be a reason to lie. Lie only creates conflict, lack of trust, and potentially hurt feelings. So, instead of sparing a person's feeling by lieing, there may be a new problem that is created by lieing.
Sometimes, the truth does hurt, but a person will respect you more for being truthful. However, a lie will hurt even more if the person finds out that they no longer can trust you.