First off, he's not disposing that flag, so that's that.
Here ya go.
Four options for retiring worn-out American flags
You can burn it, recycle it, donate it, cut it up into pieces (as long as you don't cut through the blue field, as once you cut it, it's no longer a U.S. flag) and dispose of the pieces respectfully ( that means wrap it up carefully and put it out with the trash, as long as it's done in a dignified and respectable manner). Many of the flags made today of synthetic material are not safe to burn, as they give off toxic fumes. So you can't burn them.
No where, anywhere, does anything say you can't keep it if it's tattered. They just say don't fly it if it's not suitable for display, and dispose of it properly when the time comes.
Here's a link to the 2nd flag flown at Iwo Jima. It's tattered, and displayed. It's not being flown, but it is being displayed. Maybe we should write to the National Museum of the Marine Corp and tell them they shouldn't be displaying it?
Raising the Flag on Iwo Jima - Wikipedia