The only reason I can currently see to keep this is for your grandfather’s sake, which is a sentimental reason. Since you are a rational person and feel very uncomfortable having it in the house because of the implications, I would get rid off it.
The only way to make money I can see would be Neo-Nazis of some type or other, which you apparently (correctly, of course) don’t want. So either give it to a museum or destroy it, grandfather or not. That’s what I would see as rational.
Find a VFW
Use this: http://www.vfw.org/index.cfm?fa=news.levelc&cid=4217
It will most likely end up in a museum somewhere if you talk to the VFW, but it won’t end up with the neo-nazis and there’s a possibility you might make a buck. More importantly, it will end up in a museum.
I hear Marilyn Manson is a fan of collecting Nazi memorabilia. You should get in touch with him.
Donate it to a museum.
Many states have their own State War Museum.
Ask you State Representative about it.
So Quasi, could you say that you got pawned?
Don’t tell me one of them is meant to be Hitler’s? Well, you live and learn!
I understand your dilemma, I had some similar Nazi trophies brought back by my uncle. I didn’t want them in the house, but I didn’t want to just sell them because I didn’t want them winding up in the hands of neo-Nazis.
Donation to a museum with a tax write-off seemed the best approach to me.
Those large flags are extremely common and worth way less than what you would think. Perhaps $100 or so.
Say you’re gonna sell it, you obviously wanna make as much money as possible, who what does it matter it current day skin heads buy it?
I’ve sold a bunch of stuff on eBaY and I dont know anything about my buyers except their username. Due to the number of sales I’ve had, I’ve probably sold to rapists, murderers or child molesters… but I’m not looking for a moral high ground, I’m trying to sell a product.
My father was a Major in WWII and also had a bunch of Nazi booty. I still have a Leica camera used for taking aerial shots. My little brother has (or had, I don’t know if he still has it) the big and little flags, swords and lugers etc. This stuff is everywhere.
If you intend on keeping it you might want to get some tips on storage as fabric can be damaged by improper storage.
I once sold an Iron Trivet manufactured in the 30’s or 40’s that had the Confederate creed in latin on it “death to traitors” or something. Got a good dollar for that on ebay (paid 5 sold for 20).
Not for me. It’s illegal for me to own a Nazi flag.
Your location lists your address as being in the US. Is this no longer the case?
He is a Prison Warden, so I suppose that comes into it.
If you donate it to a museum and you want a tax write off you’ll have to get it appraised yourself by a third party. Museum staff are not ethically permitted to put a monetary value on donated artifacts though it’s possible to find some that can authenticate the item for you. There are several advantages to donating the item to a museum.
#1. The museum will have the storage facilities to preserve the artifact for many years.
#2. Your name, the name of your grandfather, and how he came into possession of the flag will be recorded and attached -not physically- to the artifact in perpetuity.
#3. You will be helping a museum by adding something valuable and unique to their collection.
One big problem is that the flag is huge and many museum's may not be able to display safely. Which means that it wouldn't be on display. That's okay. We have things at our museum that will never go on public display for a variety of reasons.
Odesio
I an readily imagine it might not be good form for a US prison warden to own Nazi memorabilia but illegal? Is he prevented from owning Confederate Civil War memorabilia as well?
Gonna be a big frame. 
I too am curious why it is only illegal for you and nobody else.
Condition of employment.
He likely has a clause that states he cannot belong to any hate based groups or something along those lines. The police officers I know here in California fall under this, as do I as a servicemember in the US Navy.
teletype, there is nothing wrong with keeping the flag. Document the story behind it; your grandfather’s service, and his capturing of the flag.
People who know you will understand that you are not sympathetic to Nazi ideals. If it is in storage, not on display, it is nothing to fret about.
Are Civil War Confederate collectible items considered “hate group” memorabilia.